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What is the Annual Worth decision rule for choosing the best of several mutually exclusive alternatives with unequal lives under the assumption that the production
What is the Annual Worth decision rule for choosing the best of several mutually exclusive alternatives with unequal lives under the assumption that the production activity will go on indefinitely (i.e., for much longer than the useful lives of all the alternatives under consideration)? Be able to select the best option from the following information on several alternatives: (i) capital cost, (ii) useful life, (ii) salvage value at the end of the useful life, (iv) annual operating costs, and (v) annual revenue (if any) a. Select the best alternative using Annual Worth if MARR= 12% and you expect the activity to continue essentially forever. Show your work. i. Alternative A: Capital cost = $15,000; Annual Revenue = $8,000, Annual operating costs- $1,600; useful life = 7 years; salvage value = $3,000. Alternative B: Capital cost-$25,000; Annual Revenue = $13,000; Annual operating costs = $400; useful life = 10 years, salvage value= $6,000 ii. b. How does the analysis change if the study period is 7 years (i.e., equipment will be needed for just 7 years)
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