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Jane is using a 10% annual interest rate to decide between three options: Model A, B or C. Model (A) Model (B) Model (C) Initial
Jane is using a 10% annual interest rate to decide between three options: Model A, B or C. Model (A) Model (B) Model (C) Initial Cost $5,000 $2,000 $7,500 Life (years) 4 4 4 Annual Savings $1,500 $650 $2,500 25. Calculate the Annual Worth of purchasing Model A, B and C A. AWA=$5,473; AWB=$2,205; AWc=$8,289 B. AWA=-$77; AWB=$ 19; AWc=$134 C. AWA=$11,000; AWB=$4,600; AWc=$17,500 D. AWA=$1,000; AWB=$600; AWc=$2,400 E. AWA=$0; AWB=$2,500; AWc--$5,000 26. Based on the AW analysis, which of the above options is/are not attractive: A. Model A B. Model B C. Model C D. Can't decide since AW analysis is not a commonly used tool E. All three options 27.Would the above decision change if the product life for all three models are 5 years instead of 4 years? Would the above decision change if PW analysis is applied instead of AW analysis? A. Yes, for both changes B. Yes on 5 years, but no on PW C. No on 5 years, but yes on PW analysis D. No for both change E. Can't answer this question as we need more information to compute AW and PW of the new scenarios
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