4. Best Flight Inc. is considering three mutually exclusive alternatives for implementing an automated passenger check-in counter at its hub airport. Each alternative meets the same service requirements, but difference in capital investment amounts and benefits exists among them. The study period is 10 years, and the useful lives of all three alternatives are also 10 years. Market values of all alternatives are assumed to be zero at the end of their useful lives. If the airline's MARR is 10% per year, which alternative should be selected in view of the cash-flow diagram shown below: Alt A: Year end 1-10 years Cash Flow -390K 69k Alt B Year end 1-10 years Cash Flow -920k 167k Alt C Year end 1-10 years Cash Flow -660K 133.5k

4. Best Flight Inc. is considering three mutually exclusive alternatives for implementing an automated passenger check-in counter at its hub airport. Each alternative meets the same service requirements, but difference in capital investment amounts and benefits exists among them. The study period is 10 years, and the useful lives of all three alternatives are also 10 years. Market values of all alternatives are assumed to be zero at the end of their useful lives. If the airline's MARR is 10% per year, which alternative should be selected in view of the cash-flow diagram shown below: Alt A: Year end 1-10 years Cash Flow -390K 69k Alt B Year end 1-10 years Cash Flow -920k 167k Alt C Year end 1-10 years Cash Flow -660K 133.5k

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section10.A: Mutually Exclusive Investments Having Unequal Lives

Problem 2P

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