Given the following mutually-exclusive alternatives and a Minimum Attractive Rat

Question

Given the following mutually-exclusive alternatives and a Minimum Attractive Rate of Return

(MARR) of 5%, which should be chosen?

Solve as PV(Present Value), FV (Future Value)and AW (AW not graded, but I want to see your attempt) (3 separate analyses) and show which Design gets chosen in each. SHOW YOUR WORK with tool formulas, not tables at this time to ensure you%u2019re understanding the concepts.

Table

Year               Design A           Design B           Design C

Year

Design A

Design B

Design C

0(cost)

($2500)

($2700)

($3000)

1

$0

$650

$0

2

$0

$650

$350

3

$0

$650

$700

4

$0

$650

$1050

5

$3100

$650

$1400

Total

$600

$550

$500

Year

Design A

Design B

Design C

0(cost)

($2500)

($2700)

($3000)

1

$0

$650

$0

2

$0

$650

$350

3

$0

$650

$700

4

$0

$650

$1050

5

$3100

$650

$1400

Total

$600

$550

$500

Explanation / Answer

for design A, NPV = -2500+(3100/1.05^5) = $-71

for design B, NPV = -2700+650*PVIFA(5,5) = -2700+650*4.32 = $108

for design C, NPV = -3000+(350/1.05^2)+(700/1.05^3)+(1050/1.05^4)+(1400/1.05^5) =$ -117

design B should be chosen

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