Take AAA as 3.

Problem 3. (20 pts) Two designs, A and B, are being considered by a company in Kentucky. They use a (AAA + 3)% percent/year rate of return and a 24-year life for decisions of this type. The relevant characteristics for each design are shown below. Initial Cost Estimated Life Salvage Value Annual Maintenance cost Design A $40000 12 years None $800 Design B $60000 24 years $5000 $500 a) What is the future worth of each design? b) What is the decision rule for determining the preferred design based on future worth ranking? Which structure should be recommended? c) Plot a graph for both alternatives future worth changes with the ARR (annual rate of return) if expected annual rate of return varies from (AAA+ 3)% to (AAA+6)%. What do you infer