12-18. Two mutually exclusive investment alternatives are being considered, and one of them must be selected. Alternative...
Question:
12-18. Two mutually exclusive investment alternatives are being considered, and one of them must be selected. Alternative A requires an initial investment of $13,000 in equipment. Annual operating and maintenance costs are anticipated to be normally distributed, with a mean of $5,000 and a standard deviation of $500. The terminal salvage value at the end of the eight-year planning horizon is anticipated to be normally distributed, with a mean of $2,000 and a standard deviation of $800. Alternative B requires end-of-year annual expenditures over the eight-year planning horizon, with the annual expenditure being normally distributed with a mean of $7,500 and a standard deviation of $750. Using a MARR of 15% per year, what is the probability that Alternative A is the most economic alternative (i.e., the least costly)? (12.5)
Step by Step Answer:
Engineering Economy
ISBN: 9780134870069
17th Edition
Authors: William Sullivan, Elin Wicks, C Koelling