You are considering investment in one of the following two options. Assume an interest rate of 12% per year, compounded monthly. Option A & Option B

Initial Cost, respectively -$100,000 -$800,000 Quarterly Maintenance Cost, respectively -$26,000 -$15,000 Salvage Value, respectively $16,000 $200,000 Lifespan (years) 2 & 4, respectively

a. What is the effective monthly interest rate?

b. What is the effective quarterly interest rate (to 2 decimal places)?

c. Draw cash flow diagrams for the two projects.

d. Calculate the PW of the 2 options, assuming repeatability. Which option would you choose?

e. Calculate the quarterly worth of the 2 options (AW). Which option would you choose?