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Compare the alternatives C and D on the basis of a present worth analysis, and select the best alternative, using an interest rate of 10%
Compare the alternatives C and D on the basis of a present worth analysis, and select the best alternative, using an interest rate of 10% per year. D -32,000 -3,000 Alternative First cost, $ AOC, S/year Annual increase in operating cost, $/year Salvage value, s Life, years -40,000 -7,000 -1,000 9,000 10 500 5 O -40,000 - [7000(P/A,10%,10) + 1000(P/G,10%,10)] + 9000(P/F,10%,10)= $-102,434; Select alternative C -32,000 - 3000(P/A, 10%,10) - 31,500(P/F10%,5) + 500(P/F,10%, 10) = $-69,799; Select alternative D -40,000 - [7000(PIA,10%,10) + 1000(P/G,10%,10)] + 9000(P/F,10%,10) = $-101,234; Select alternative C -32,000 - 3000(P/A, 10%, 10) - 31,500(P/F10%,5) + 500(P/F,10%, 10) = $-89,809; Select alternative D
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