Question
A firm is considering three mutually exclusive alternatives as part of a production improvement program.The alternatives...
A firm is considering three mutually exclusive alternatives as part of a production improvement program.The alternatives are:
A B C
Installed cost $10,000 $15,000 $ 20,000
Annual benefit 1625 1530 1890
Useful life (Years) 10 20 20
The salvage value of each alternative is zero.At the end of 10 years Alternative A could be replaced with another A with identical cost and benefits .
a)Which alternative should be selected if interest is 6%
b)3%
c)If there is a difference between part a) and b) can you explain it ?
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