Four different alternative designs as shown in table below are available for a p
ID: 2507225 • Letter: F
Question
Four different alternative designs as shown in table below are available for a public interest project. Determine using the capitalized cost approach which alternative is the most desirable one. MARR =5%
Alternative X
Alternative Y
Alternative Z
Do nothing
Initial Cost
$10M
$28M
$5M
0
Benefit/Year
1M
1.8M
1M
0
Life in Years
15
30
10
0
A.
Alternative Z
B.
Alternative Y
C.
Do nothing
D.
Alternative X
Alternative X
Alternative Y
Alternative Z
Do nothing
Initial Cost
$10M
$28M
$5M
0
Benefit/Year
1M
1.8M
1M
0
Life in Years
15
30
10
0
Explanation / Answer
for Alt x,
NPV = -10000+PV(0.05,15,1,0)
=$380
for Y
NPV = -28000+PV(0.05,30,1.8,0)
= -2,330
for Z,
NPV= -5+PV(0.05,10,,0)
=$2720
so choose alternate Z
ans:A)Alternative Z
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