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Annual expenses for two alternatives have been estimated on different bases as shown in the table. If the average general price inflation rate is expected
Annual expenses for two alternatives have been estimated on different bases as shown in the table. If the average general price inflation rate is expected to be 6% per year and the real rate of interest is 9% per year, 1. to compare their equivalent worth in the base period, which worth method should you use? 2. what is the market interest rate in percent format? (HINT: show no more than 2 decimal points) 3. which alternative has the least negative equivalent worth in the base period? (HINT: Omit $ and % symbols, but observe signage +/-) End of Year Alternative A (EOY) Alternative EB Annual Expenses Estimated Annual Expenses Estimated in in Actual Dollars $120,000 $132,000 $148,000 $160,000 Real Dollars with b 0 $100,000 $110,000 $120,000 $130,000 4
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