Qutestion 3 Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of 10% Alternative A Initial cost $50,000 Annual maintenance cost $4,000 Estimated annual benefit $15,000 Alternative B Initial cost $30,000 Annual maintenance cost $3,000 Estimated annual benefit $9,000 a. Select B with B/C=1.14 b. Select B with B/C=1.41 c. Select A with B/C=1.14 d. Reject A with B/C=1.14

Qutestion 3 Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of 10% Alternative A Initial cost $50,000 Annual maintenance cost $4,000 Estimated annual benefit $15,000 Alternative B Initial cost $30,000 Annual maintenance cost $3,000 Estimated annual benefit $9,000 a. Select B with B/C=1.14 b. Select B with B/C=1.41 c. Select A with B/C=1.14 d. Reject A with B/C=1.14

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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Question

Qutestion 3 Solve this problem using the incremental Benefit - Cost ration with, expected life of 10 years and rate of return of

10%

Alternative A Initial cost

$50,000

Annual maintenance cost

$4,000

Estimated annual benefit

$15,000

Alternative B Initial cost

$30,000

Annual maintenance cost

$3,000

Estimated annual benefit

$9,000

a. Select

with

B/C=1.14

b. Select

with

B/C=1.41

c. Select

with

B/C=1.14

d. Reject

with

B/C=1.14

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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