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In this section, the concept of present worth method of comparison applied to the selection of the best alternative is demonstrated with several illustrations. EXAMPLE
In this section, the concept of present worth method of comparison applied to the selection of the best alternative is demonstrated with several illustrations. EXAMPLE 4.1 Alpha Industry is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial outlay and annual revenues with respect to each of the technologies are summarized in Table 4.1. Suggest the best technology which is to be implemented based on the present worth method of comparison assuming 20% interest rate, compounded annually. Table 4.1 Annual revenue (Rs.) Technology 1 Technology 2 Technology 3 Initial outlay (Rs.) 12,00,000 20,00,000 18,00,000 4,00,000 6,00,000 5,00,000 Life (years) 10 10 10
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