Question

The CA Company, an information system consulting firm is attempting to evaluate the profitability of a new project of extending its current information system hardware. There are three mutually exclusive proposals available for this proposed extension. It is known that the CA Company considers proposals with minimum 15% annually compounding return. Three Proposed Mutually Exclusive Alternatives are profiled as follow:

	Proposal-X		Proposal-Y		Proposal-Z
Initial Investment	$ 40,000		$60,000		$52,000
Annual Revenue	$21,000		$28,000		$28,600
Annual Expenses	$11,100		$12,500		$12,100
Natural Life	7 Years		7 Years		7 Years
Salvage @ EOL	$1,500		$2,400		$900

Which alternative should be selected if the decision is done based on only Net Equivalent Worth?

Answer 1