Using the incremental B/C analysis (AB/C). Determine the best alternative. i=10% First cost O &M Cost/year Benefit/year Salvage value Life in years A 45,000 $4,000 $15,000 $9,000 B $25,000 $1,500 $9,500 $5,000 10 $35,000 $3,000 $14,000 $7,000 D $15,000 $2,000 $8,000 $3,000

Using the incremental B/C analysis (AB/C). Determine the best alternative. i=10% First cost O &M Cost/year Benefit/year Salvage value Life in years A 45,000 $4,000 $15,000 $9,000 B $25,000 $1,500 $9,500 $5,000 10 $35,000 $3,000 $14,000 $7,000 D $15,000 $2,000 $8,000 $3,000

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

Using the incremental B/C analysis (AB/C). Determine the best alternative, i=10%
First cost
O &M Cost/year
Benefit/year
Salvage value
Life in years
A
45,000
$4,000
$15,000
$9,000
B
$25,000
$1,500
$9,500
$5,000
10
с
$35,000
$3,000
$14,000
$7,000
D
$15,000
$2,000
$8,000
$3,000

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Step 2: Determine the internal rate of return of each alternative:

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Step 3: Determine first incremental cash flow and IRR:

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Step 4: Second incremental Cash flow and IRR:

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Step 5: Third incremental Cash flow and IRR:

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