The data presented below is given in actual dollars. Compare the present worth of the two alternatives. The rate of interest is 12%. The
The data presented below is given in actual dollars. Compare the present worth of the two alternatives. The rate of interest is 12%. The rate of inflation is 7%. ALTERNATIVE A ALTERNATIVE B $14,000 $5,830 $6,182 $6,551 $6,941 $0 4 yrs First Cost Income 1st yr Income 2nd yr Income 3rd yr Income 4th yr Salvage Value Service Life $10,000 $4,240 $4,496 $4,764 $5,048 $0 4 yrs a) Constant-dollar analysis (converting to constant dollars first and then using inflation-free interest rate). b) Actual-dollar analysis (using the combined interest factor).
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Authors: William Lanen, Shannon Anderson, Michael Maher
3rd Edition
9780078025525, 9780077517359, 77517350, 978-0077398194
