Question 1 Consider the following three mutually exclusive alternatives:

Alternatives A B C Initial cost $35,000 $55,000 $65,000 Annual benefit 3,000 6,000 9,000 Salvage value - 12,000 15,000 Useful life, in years 25 15

Assuming that alternatives B and C are replaced with identical units at the end of their useful lives, and a 10% interest rate, which alternative should be selected? Use an annual cash flow analysis.

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