Two different types of equipment are being considered by a small community to mo

Question

Two different types of equipment are being considered by a small community to monitor the emissions from a nearby power production plant. Both alternatives will serve the purpose but they have different costs, salvage values, and lives as shown in the table below. Use a benefit/cost ratio analysis to recommend the preferred choice to the community leaders. The social discount rate used in such calculations is 6%.
Alternative 1 Alternative 2
First Cost: $100,00 $120,000
Annual Operation/Maintenance Cost: $20,000$22,000
Salvage Value: $20,000 $25,000
Life (years): 4 6

Explanation / Answer

$44000

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