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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 |
- 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?
- Yes, for both changes
- Yes on 5 years, but no on PW
- No on 5 years, but yes on PW analysis
- No for both change
- Cant answer this question as we need more information to compute AW and PW of the new scenarios
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