A company invests in one of the two mutually exclusive alternatives. The life of both alternatives is estimated to be 5 years with the following investments, annual returns and salvage values.

Alternative A B Investment (7) — 200,000 — 220,000 Annual equal return (7) + 45,000 + 55,000 Salvage value (7) + 25,000 + 35,000 Determine the best alternative based on annual equivalent method by assuming i = 25%.

AppendixLO1