Consider these two alternatives.

Consider these two alternatives.

	Alternative 1	Alternative 2
Capital investment	$4,500		$6,300
Annual revenues	$1,600		$2,000
Annual expenses	$410		$530
Estimated market value	$850		$1,350
Useful life	8 years		9 years

Question content area bottom

Part 1

a. The capital investment of Alternative 2 would have to be

$enter your response here

or less for the initial decision to be reversed. (Round to the nearest dollar.)

a. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial decision based on these data would be reversed? The annual MARR is 18% per year.

b. Determine the life of Alternative 1 for which the AWs are equal.

Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year.

Question content area bottom

Part 1

a. The capital investment of Alternative 2 would have to be $enter your response here or less for the initial decision to be reversed. (Round to the nearest dollar.)

\begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|c|}{ Discrete Compounding; i=18%} \\ \hline & \multicolumn{2}{|c|}{ Single Payment } & \multicolumn{4}{|c|}{ Uniform Series } \\ \hline & \begin{tabular}{c} Compound \\ Amount \\ Factor \end{tabular} & \begin{tabular}{c} Present \\ Worth Factor \end{tabular} & \begin{tabular}{c} Compound \\ Amount \\ Factor \end{tabular} & \begin{tabular}{c} Present \\ Worth Factor \end{tabular} & \begin{tabular}{l} Sinking \\ Fund \\ Factor \end{tabular} & \begin{tabular}{c} Capital \\ Recovery \\ Factor \end{tabular} \\ \hline N & \begin{tabular}{c} To Find F \\ Given P \\ F/P \end{tabular} & \begin{tabular}{c} To Find P \\ Given F \\ PIF \end{tabular} & \begin{tabular}{c} To Find F \\ Given A \\ FIA \end{tabular} & \begin{tabular}{c} To Find P \\ Given A \\ P/A \end{tabular} & \begin{tabular}{c} To Find A \\ Given F \\ AlF \end{tabular} & \begin{tabular}{c} To Find A \\ Given P \\ A/P \end{tabular} \\ \hline 1 & 1.1800 & 0.8475 & 1.0000 & 0.8475 & 1.0000 & 1.1800 \\ \hline 2 & 1.3924 & 0.7182 & 2.1800 & 1.5656 & 0.4587 & 0.6387 \\ \hline 3 & 1.6430 & 0.6086 & 3.5724 & 2.1743 & 0.2799 & 0.4599 \\ \hline 4 & 1.9388 & 0.5158 & 5.2154 & 2.6901 & 0.1917 & 0.3717 \\ \hline 5 & 2.2878 & 0.4371 & 7.1542 & 3.1272 & 0.1398 & 0.3198 \\ \hline 6 & 2.6996 & 0.3704 & 9.4420 & 3.4976 & 0.1059 & 0.2859 \\ \hline 7 & 3.1855 & 0.3139 & 12.1415 & 3.8115 & 0.0824 & 0.2624 \\ \hline 8 & 3.7589 & 0.2660 & 15.3270 & 4.0776 & 0.0652 & 0.2452 \\ \hline 9 & 4.4355 & 0.2255 & 19.0859 & 4.3030 & 0.0524 & 0.2324 \\ \hline 10 & 5.2338 & 0.1911 & 23.5213 & 4.4941 & 0.0425 & 0.2225 \\ \hline 11 & 6.1759 & 0.1619 & 28.7551 & 4.6560 & 0.0348 & 0.2148 \\ \hline 12 & 7.2876 & 0.1372 & 34.9311 & 4.7932 & 0.0286 & 0.2086 \\ \hline 13 & 8.5994 & 0.1163 & 42.2187 & 4.9095 & 0.0237 & 0.2037 \\ \hline 14 & 10.1472 & 0.0985 & 50.8180 & 5.0081 & 0.0197 & 0.1997 \\ \hline 15 & 11.9737 & 0.0835 & 60.9653 & 5.0916 & 0.0164 & 0.1964 \\ \hline \end{tabular}