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Problem 3 (12 points) Compare the following alternatives using an interest rate of 12% compounded monthly answering the following questions: Project D Project C $80,000
Problem 3 (12 points) Compare the following alternatives using an interest rate of 12% compounded monthly answering the following questions: Project D Project C $80,000 1,500 1,000 10 $70,000 2,000 Initial cost Monthly 0&M costs Salvage value Useful life (years) a. What is the decision criterion? (2 pts) b. Choose the best project. (8 pts) Bonus: What is the effective annual interest rate? (3 pts) Remember to clearly show the cash flow diagram(s) and the necessary equivalent model(s). (2 pts)
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