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Problem 3 Chapter 8 Incremental Analysis (50 Points) Consider four mutually exclusive alternative investments that have 10-year useful lives and a salvage value of $850.
Problem 3 Chapter 8 Incremental Analysis (50 Points) Consider four mutually exclusive alternative investments that have 10-year useful lives and a salvage value of $850. If the Minimum Attractive Rate of Return (MARR) is 6%, which alternative should be selected? Initial Cost: A. $3,000 B. $2,000 C. $5,000 D. $4,000 The net annual income (EUAB), after paying all operating expenses is projected at: A. $447 B. $259 c. $885 D. $651 Numerical Solution: B C D PW Cost EUAB Salvage PW, PW (PWPWM) - PW.. Computations: (Use back of facing page or last page in this exam booklet, if necessary) Perform Incremental Analysis to select the best alternative. Rearranged Alternatives: PW Benefit + PW Salvage PW Cost Net Present Worth Decision Pairwise Comparisons Delta Alternative: APW Benefit APW Cost Decision 7,000 6,000 0 NPW 5,000 4,000 PW of Benefits 3,000 2,000 1,000 0 000* 1.000 2,000 000's 000't 000's 000'9 PW of Cost
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