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(b) Calculate the Rate of Return for each project, and determine which of the two projects will you recommend? Why? Table 1: Life-Cycle Analysis Data
(b) Calculate the Rate of Return for each project, and determine which of the two projects will you recommend? Why? Table 1: Life-Cycle Analysis Data Project A Project B Capital cost = $10,000,000 Capital cost = $9,500,000 Annual Operation & Maintenance cost = Annual Operation & Maintenance cost = $500,000 $350,000 Reduction in Annual User cost = Reduction in Annual User cost = $5,000,000 $4,000,000 Project life = 30 years Project life = 25 years Discount rate = 4% Discount rate = 5% Salvage value = $3,500,000 Salvage value = $3,000,000
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