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7. Three alternatives produce identical benets to the rm but have the following costs: Name Initial Cost Year 1 Year 2 Year 3 Year 4
7. Three alternatives produce identical benets to the rm but have the following costs:
Name Initial Cost Year 1 Year 2 Year 3 Year 4
A $100,000 $10,000 $10,000 $10,000 $10,000
B $120,000 $ 8,000 $ 6,000 $ 4,000 $ 2,000
C $40,000 $40,000 $40,000 $40,000 $40,000
Using a discount rate of 14%, compute the total present value of each alternative. Which is cheapest?
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