show work l 1 Two mutually exclusive alternatives are being

show work

l 1. Two mutually exclusive alternatives are being considered. Alt. A will cost $35,000, and provide benefits of $14,000/yr over its 4 year life. Alt. B will cost $51,000 and return annual benefits of$18,500 over its 4 year life. a. Use NPV techniques to analyze these two alternatives and make a recommendation. The BTRR is 12%. ANS. b. Use Annual Worth techniques to analyze these investments and make a recommendation.

Solution

A will be costing 35000$ and provide benefits of 14000/yr over 4 year life

PWa = -35000 + 14000(P/A,12%,4)

=> -35000 + 14000 * 3.37

=> 16800

B will be costing 51000$ and provide benefits of 185000/yr over 4 year life

PWb = -51000 + 18500(P/A,12%,4)

=> 11345

Hence the policy A will be better as compared to policy B