Evaluate these mutually exclusive alternatives with a horizon of 20 years and a MARR of 15%Use the conventional B/C ratio by PW analysis method. Note: (Do nothing) is not an option.ABInitial Investment$9,500$18,500Annual Savings$3,200$5,000Annual CostsSalvage Value$1,000 $2,750$600$4,200Conventional B-C ratio with PW:B-C==PW(benefits of the proposed project)PW(total costs of the proposed project)PW(B)I-PW(MV) + PW(O&M)ABC1AB2Initial Invest$9,500 $18,5003Ann. Savings$3,200 $5,0004Ann. Costs$1,000 $2,7505 Salvage Val$6,000 $4,2006PW of Ben.$20,030 $31,2977PW of Costs$15,393 $35,457aBIC1.300.88

The objective of the question is to evaluate two mutually exclusive alternatives, option A and…

Answered: Evaluate these mutually exclusive…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 13P

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Question

Evaluate these mutually exclusive alternatives with a horizon of 20 years and a MARR of 15%
Use the conventional B/C ratio by PW analysis method. Note: (Do nothing) is not an option.
A
B
Initial Investment
$9,500
$18,500
Annual Savings
$3,200
$5,000
Annual Costs
Salvage Value
$1,000 $2,750
$600
$4,200
Conventional B-C ratio with PW:
B-C=
=
PW(benefits of the proposed project)
PW(total costs of the proposed project)
PW(B)
I-PW(MV) + PW(O&M)
A
B
C
1
A
B
2
Initial Invest
$9,500 $18,500
3
Ann. Savings
$3,200 $5,000
4
Ann. Costs
$1,000 $2,750
5 Salvage Val
$6,000 $4,200
6
PW of Ben.
$20,030 $31,297
7
PW of Costs
$15,393 $35,457
a
BIC
1.30
0.88

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