52. One of two mutually exclusive alternatives must be selected for implementation.

Alternative A is an equipment purchase; Alternative B is a lease arrangement with annual payments. The characteristics of the two investments are shown in the table below. Use an 8 year planning horizon and a MARR of 15%/yr.

For the following questions, determine an analytical solution:

a. Determine the probability that Alternative A is the preferred alternative.

b. Using a Monte Carlo simulation with 10,000 iterations, estimate the mean and standard deviation of present worth and the probability of positive present worth.

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Parameter Mean Std. Dev. Distribution Initial Cost $13,000 None None Annual Maintenance $5,000 $500 Normal Salvage Value $2,000 $800 Normal End-of-Year Lease Payment $7,500 $750 Normal Alt. AAAAB