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7. Consider the following information associated with two alternatives: Alternative 1 Alternative 2 -40,000 -20,000 Initial Asset Cost (SAR) Annual Cost (SAR/year) Salvage Value (SAR)
7. Consider the following information associated with two alternatives: Alternative 1 Alternative 2 -40,000 -20,000 Initial Asset Cost (SAR) Annual Cost (SAR/year) Salvage Value (SAR) Life (years) -65,000 -15,000 25,000 10,000 3 4 Assume that the evaluation of the two alternatives is performed over a 3-year period and the MARR is 12% per year. In addition, if the asset is sold prior to its life, the salvage value is expected to change by 5,000 per year. What is the present worth (PW) value for alternative 2? (select the closest answer) a) SAR -83,232 b) SAR -79,673 c) SAR -89,225 d) SAR -86,791 8. Refer to question (07), the relation that correctly calculates the present worth of alternative 2 over its life is: a) - 65,000 - 15,000(P/A,6%,8)+25,000(P/F,6%,8) b) - 65,000 - 15,000(P/A,12%,4) + 25,000(P/F.12%,4) c) - 65,000 - 15,000(P/A,12%,3)+25,000(P/F,12%,3) d) - 65,000 [1 + (P/F,12%,4)+ (P/F,12%,8)] - 15,000(P/A, 12%,12) + 10,000(P/F,12%,4)
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