Consider these mutually exclusive alternatives. MARR = 8% per year, so all the alternatives are acceptable.

a. At the end of their useful lives, alternatives A and C will be replaced with identical replacements (the repeatability assumption) so that a 20-year service requirement (study period) is met. Which alternative should be chosen and why?
b. Now suppose that at the end of their useful lives, alternatives A and C will be replaced with replacement alternatives having an 8% internal rate of return. Which alternative should be chosen and why? (Note: This assumption allows MEAs to be directly compared with the PW method over their individual useful lives-which violates the repeatability assumption implicit to Chapter 6.)

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Alternative Capital investment $250 $375 $500 Uniform annual savings Useful life Computed IRR (thousands) (thousands) (years) (over useful life) $40.69 10 10% $44.05 $131.90 205 10% 10%