A company is considering two investment alternatives:

The net profit represents all profits less operating and maintenance costs, but BEFORE taxes. The company pays 70% of its year end profit as taxes. Use straight-line depreciation. Note that only the salvage value differs. Determine the best alternative using an interest rate of 10%.

Initial investment Salvage value Annual net profit Life Alternative A $150,000 $150,000 $70,000 15 years B $150,000 $0 $70,000 15 years