Complete the tollowing analysis of investment alternatives and select the prefer
ID: 1154480 • Letter: C
Question
Complete the tollowing analysis of investment alternatives and select the preferred one The study 6) period is three years and the MARR-15% per year ? lten.tive ? | Allen.tive B Capital Investment Annual Revenues Annual Costs 250 Market Value at EOY 3 Altern.tn.. ( 13,000 5,540 11,000 16,000 4.000 6,000 500 400 6.150 5,000 850 2800 577 PW( 15%) A) Alternative C B) Alternative A C) Do nothing D) Alternative B useful life for each 7) 7) For the following incremental table, assume a MARR: 15% per year and a alternative of 8 years that equals the the preferred alternative study period. Complete the incremental analysis and select Y-Z W-Y X-W Capital Investment Annual cost savings Salvage Value PW(15%) 250 400 550 70 100 97 90 50 20 15 200 B) Alternative Y C) Alternative X D) Alternative Z A) Alternative WExplanation / Answer
Alternative A
Alternative B
Alternative C
Capital Investment
11,000
16,000
13,000
Annual Revenues
4,000
6,000
5540
Annual Cost
25
500
400
Salvage Value
5,000
6,150
2,800
PW (15%)
850
SELECT
PW (Study Period 3 years)
PW = -16,000 + (6000 – 500)(P/A, 15%, 3) + 6,150 (P/F, 15%, 3)
PW = -16,000 + (5,500)(P/A, 15%, 3) + 6,150 (P/F, 15%, 3)
PW = -16,000 + (5,500)( 2.2832) + 6,150 (0.6575)
PW = 601
577
Select Alternative A because of more PW (Option B)
7.
Y – Z
W – Y
X – W
Capital Investment
-250
-400
-550
Annual Cost Savings
70
90
15
Salvage Value
100
50
200
PW (15%)
97
20
PW at 15%, Study Period is 8 years
PW = -550 + 15 (P/A, 15%, 8) +
200 (P/F, 15%, 8)
PW = -550 + 15 (4.4873) +
200 (0.3269)
PW = -417
Taking the incremental analysis for X – W, as the PW is negative, select W. (Option A)
If we take Y – Z, select Y
If we take W – Y, Select W
Alternative A
Alternative B
Alternative C
Capital Investment
11,000
16,000
13,000
Annual Revenues
4,000
6,000
5540
Annual Cost
25
500
400
Salvage Value
5,000
6,150
2,800
PW (15%)
850
SELECT
PW (Study Period 3 years)
PW = -16,000 + (6000 – 500)(P/A, 15%, 3) + 6,150 (P/F, 15%, 3)
PW = -16,000 + (5,500)(P/A, 15%, 3) + 6,150 (P/F, 15%, 3)
PW = -16,000 + (5,500)( 2.2832) + 6,150 (0.6575)
PW = 601
577
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