Find the preferred alternative based on an analysis of your choice. Also estimate the sensitivity of this alternative to changes in the cost and benefit structure

1. A firm is considering three mutually exclusive alternatives as part of a production improvement program. The alternatives are as follows:

A B C

Installed Cost ($) 10,000 15,000 20,000

Uniform Annual benefit ($) 1,625 1,625 2000

Useful life (Years) 20 20 20

For each alternative, the salvage value is zero. The MARR is 6%. Which alternative should be selected based on the INCREMENTAL ANALYSIS method?

2. An investment in a crane is expected to produce profit from its rental as shown. Assuming a salvage value of 0, what is the present value of the investment assuming 12 % interest rate?

Year Profit ($)

1. 15000
2. 12500
3. 10000
4. 7500
5. 5000
6. 2500