Question: 11-5. Consider these two alternatives. (11.2) Alternative 1 Alternative 2 Capital investment $4,500 $6,000 Annual revenues $1,600 $1,850 Annual expenses $400 $500 Estimated market $800

11-5. Consider these two alternatives. (11.2) Alternative 1 Alternative 2 Capital investment $4,500 $6,000 Annual revenues $1,600 $1,850 Annual expenses $400 $500 Estimated market $800 $1,200 value Useful life 8 years 10 years

a. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial decision based on these data would be reversed? The annual MARR is 15% per year.

b. Determine the life of Alternative 1 for which the AWs are equal.

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