USE CO-TERMINATED AND PRESENT WORTH in solving the problem. Show cash flow diagram and complete solution. There is a continuing requirement for stand by electrical power at a public utility service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life, and an annual cost of $2,200 the first year and increasing $300 per year thereafter and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of $90,000, a six-year useful life, and annual cost of 2,100 and a net salvage value of $13,000. The current interest rate is 10% annually. What alternative are you going t
USE CO-TERMINATED AND PRESENT WORTH in solving the problem. Show cash flow diagram and complete solution. There is a continuing requirement for stand by electrical power at a public utility service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life, and an annual cost of $2,200 the first year and increasing $300 per year thereafter and a net salvage value of $8,400 at the end of the useful life. Alternative B has an initial cost of $90,000, a six-year useful life, and annual cost of 2,100 and a net salvage value of $13,000. The current interest rate is 10% annually. What alternative are you going t
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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USE CO-TERMINATED AND PRESENT WORTH in solving the problem. Show cash flow diagram and complete solution.
There is a continuing requirement for stand by electrical power at a public utility
service facility. Alternative A involves an initial cost of $72,000, a 3-year useful life,
and an annual cost of $2,200 the first year and increasing $300 per year thereafter
and a net salvage value of $8,400 at the end of the useful life. Alternative B has an
initial cost of $90,000, a six-year useful life, and annual cost of 2,100 and a net
salvage value of $13,000. The current interest rate is 10% annually. What
alternative are you going to recommend if you use co terminated (study period is 3 years - epsilon = 10%) assumption?
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