Two mutually exclusive alternatives are being considered. The MARR is 15% per year. General inflation is 5.5%/year. Based on the data below, performan appropriate analysis to select the most economical alternative. State your assumptions. ParameterAlternative AAlternative B$150,000$240,000Initial investmentAnnual revenue$39,000$50,000(actual $)Annual cost (actual $5,000 in year 1increasing by$500 each year forremaining years$6,000S)Market value at end $25,000$40,000of useful life(year 0 S)Useful life, years8

In case of analysis of alternatives for economic analysis, the alternative bearing the least cost or…

Parameter Alternative A Alternative B $150,000 $240,000 Initial investment Annual revenue $39,000 $50,000 (actual $) Annual cost (actual $5,000 in year 1 increasing by $500 each year for remaining years $6,000 S) Market value at end $25,000 $40,000 of useful life (year 0 S) Useful life, years 8

Parameter Alternative A Alternative B $150,000 $240,000 Initial investment Annual revenue $39,000 $50,000 (actual $) Annual cost (actual $5,000 in year 1 increasing by $500 each year for remaining years $6,000 S) Market value at end $25,000 $40,000 of useful life (year 0 S) Useful life, years 8

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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