41. Two mutually exclusive alternatives, A and B (both MACRS-GDS 5-year property), are available. Alternative A requires an original investment of

$100,000, has a useful life of 6 years, annual operating costs of $2,500, and a salvage value at the end of year k given by $100,000(0.70)k. Alternative B requires an original investment of $150,000, has a life of 8 years, zero annual operating costs, and a salvage value at the end of year k given by

$150,000(0.80)k. The after-tax MARR is 15 percent, and a 40 percent tax rate is applicable. Perform an annual worth comparison and recommend the least-cost alternative.

a. Use a planning horizon of 6 years.

b. Use a planning horizon of 8 years and assume that an identical A will be purchased for the fi nal two years of use.