Question
The construction division of a grocery chain, prior to installing markets in communities throughout the state, is examining alternative designs with the objective of adopting
The construction division of a grocery chain, prior to installing markets in communities throughout the state, is examining alternative designs with the objective of adopting one as standard. One of these called the "Parthenon design" is expected to be less likely to go out of style; in fact, it is expected to be more durable from the standpoint of deterioration and obsolescence. This design costs $75,000 and will have a 35-year life with $7,500 salvage and annual upkeep costs for repairs of $2,500. The other known as the Pendulum design, costs $50,000 and has an estimated life of 20 years with $5,000 salvage value. Its annual repair cost will be $4,000. If the minimum attractive rate of return for the company is 20%, compare the alternatives by their present worths.
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