Question

Perform a present worth (PW)-based evaluation of the two alternatives below using a spreadsheet. The after-tax minimum acceptable rate of return (MARR) is 8% per year, Modified Accelerated Cost Recovery System (MACRS) depreciation applies, and T_e = 40%. The (GI - OE) estimate is made for the first 3 years; it is zero in year 4 when each asset is sold.

Alternative	X	Y
First Cost, $	–8,000	–13,000
Salvage Value, Year 4, $	0	2,000
GI-OE, $ per Year	3,500	5,000
Recovery Period, Years	3	3

The PW for alternative X is determined to be_____ $  .

The PW for alternative Y is determined to be ______$  .

Alternative  (Click to select)  X  Y  is selected.

Answer 1

Solution:-

Given that

MARR = 8%

for Alternative X

first cost = -$ 8000

salvage value = $ 0

GI - OE = $ 3500 / year

Time = 3 years

So,

For alternative y

first cost = -13000

salvage value = $ 2000

GI - OE = $ 5000 /year

Time = 3 years

So,

So, Alternate y is greater & suitable

Thanks for supporting***

Please give positive rating***