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Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 18% per year. At the end of the useful life, the investment will be sold. A decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation using the PW method.
A B C
Investment cost $27,000 $56,000 $42,500
Annual expenses $15,000 $13,000 $23,000
Annual revenues $23,000 $30,000 $32,000
Market value $6,500 $7,500 $9,000
Useful life 10 years 10 years 10 years
IRR 27,6% 28,1% 17,8%

Respuesta :

jepessoa

Answer:

Project B has the highest PW, therefore,, it should be selected.

Explanation:

                                             A              B               C

Investment cost           -$27,000  -$56,000  -$42,500

Annual expenses          $15,000   $13,000    $23,000

Annual revenues          $23,000   $30,000   $32,000

Market value                   $6,500     $7,500     $9,000

NCFs (1-9)                        $8,000    $17,000     $9,000

NCF 10                            $14,500   $24,500    $18,000

PW or NPV                      $10,195   $21,832      -$334

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