Dark Skies Observatory is considering several options to purchase a new deep-space

telescope. Two possible telescopes have been identied in addition to the possibility of not

buying a telescope if none are nancially attractice. The table below details the characteristics

of each telescope. MARR is 10%/year.

(a) Determine the preferred telescope using the (incremental) ERR method.

(b) Suppose that the company has a $1,000,000 budget for the purchase of a new

scope. Assuming that the remaining money, if any, will earn a return equal to the MARR,

apply portfolio analysis and determine the preferred telescope (notice that the do-nothing

alternative is also feasible).

T1 T2 Alternatives First Cost Annual Net Income Salvage Value Useful Life $270.000 $330,000 $600,000 $800,000 $70,000 $130,000 10 years 10 year