Consider three alternatives: *At the end of its useful life, an identical alternative (with the same cost,

Question:

Consider three alternatives:

A First cost $150 $50 $110 39.6 Uniform annual benefit Useful life, in years* Computed rate of retum 28.8 39.6 6 2 10% 1

*At the end of its useful life, an identical alternative (with the same cost, benefits, and useful life) may be installed.

All the alternatives have no salvage value. If the MARR is 12% which alternatives should be selected?

(a) Solve the problem by future worth analysis.

(b) Solve the problem by benefit-cost ratio analysis. 9-49

(d) If the answers in parts (a), (b), and (c) differ, explain why this is the case.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...