Three different alternatives shown in table below are being considered by Kal Te

Question

Three different alternatives shown in table below are being considered by Kal Tech Engineering systems. Assume that alternatives X and Z are replaced at the end of their lives.

1. Refer to the data above. The most desirable alternative is ________. A) Alt. Y
B) Alt. X
C) Alt. Z

D) Do nothing

Three different alternatives shown in table below are being considered by Kal Tech Engineering systems. Assume that alternatives X and Z are replaced at the end of their lives. Data Initial Cost Alternative X Alternative YAlternative Z $6,000 niform Annual Benefits Useful Life in Years MARR 810 200 1,000 $1,500 125 230 10 12% 1. Refer to the data above. The most desirable alternative is A) Alt. Y B) Alt. X C) Alt. Z D) Do nothing

Explanation / Answer

Consider the given problem , here there are 3 possible alternatives “X”, “Y”, “Z”,

So, now the PW of the alternative “X” is given by,

= (-6000) + 810*[{(1.12)^20-1}/{0.12(1.12)^20}]

= (-6000) + 810*[8.6463/1.1576], = (-6000) + 6,050.0198 = 50.02 = 50 > 0.

So, now the PW of the alternative “Y” is given by,

= (-1000) + 125/0.12, = (-1000) + 1041.67 = 41.67 = 42 > 0.

So, now the PW of the alternative “Z” is given by,

= (-1,500) + 230*[{(1.12)^10-1}/{0.12(1.12)^10}]

= (-1,500) + 230*[2.1058/0.3727], = (-1,500) + 1,299.5278, = (-200) < 0.

So, “X” be the most desirable alternatives, among all the available alternatives, since “X” have highest PW compare to all the available alternatives.

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