Consider the following mutually exclusive alternatives: Alternative A Alternativ
ID: 2627212 • Letter: C
Question
Consider the following mutually exclusive alternatives:
Alternative A
Alternative B
Capital investment
Net annual receipts
$473,000
$104,100
$1,114,000
$235,000
Both alternatives have a useful life of 20 years and no market value at that time. The MARR is 20 % per year. Determine the annual worth (AW) of the most profitable course of action. (Enter your answer as a number without the dollar sign.)
Alternative A
Alternative B
Capital investment
Net annual receipts
$473,000
$104,100
$1,114,000
$235,000
Explanation / Answer
Present worth of Alternative A
PW = -473,000+104100*PVIFA(20%,20) = -473,000+104100*4.8696 = $33925.36
annual worth is calculated as,
33925.36 = PMT*PVIFA(20%,20)
PMT, annual worth = 33925.36/4.8696 = $6966.76 (annual worth) (ANSWER) (Most profitable)
Present worth of Alternative B
PW = -1,114,000+235,000*PVIFA(20%,20) = -1,114,000+235,000*4.8696 = $30356