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Use Table 1 to answer the following questions: (a) Using the Net Present Value method, which of the two projects will you recommend for implementation?
Use Table 1 to answer the following questions: (a) Using the Net Present Value method, which of the two projects will you recommend for implementation? (b) Using the Rate of Return method, which of the two projects will you recommend? (c) Using the Benefit-Cost Ratio method, which of the two projects will you recommend? Please show your calculations and state your reasons for all three scenarios. Table 1: Life-Cycle Analysis Data
Project A | Project B |
Capital cost = $10,000,000 | Capital cost = $9,000,000 |
Annual Operating and Maintenance cost = $500,000 | Annual Operating and Maintenance cost = $350,000 |
Reduction in annual user cost = $5,000,000 | Reduction in annual user cost = $4,000,000 |
Project Life = 30 years | Project life = 25 years |
Discount rate = 4% | Discount rate = 5% |
Salvage value = $3,500,000 | Salvage value = $3,000,000 |
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