. At the end of their useful lives alternatives A and C will be replaced with identical replacements (the repeatability assumption) so that a 20-year service requirement (study period) is met. Which alternative should be chosen and why b. Now suppose that at their end of their useful lives, alternatives A and C will be replaces with replacement alternatives having an 8% internal rate of return. Which alternative should be chosen and why? Consider these mutually exclusive alternatives. MARR = 8% per year, so all the alternatives are acceptable. Alternative B $425 $49.92 Capital investment (thousands) Uniform annual savings (thousands) Useful life (years) Computed IRR (over useful life) A $280 $45.57 10 10% 20 10% $550 $145.09 5 10%
. At the end of their useful lives alternatives A and C will be replaced with identical replacements (the repeatability assumption) so that a 20-year service requirement (study period) is met. Which alternative should be chosen and why b. Now suppose that at their end of their useful lives, alternatives A and C will be replaces with replacement alternatives having an 8% internal rate of return. Which alternative should be chosen and why? Consider these mutually exclusive alternatives. MARR = 8% per year, so all the alternatives are acceptable. Alternative B $425 $49.92 Capital investment (thousands) Uniform annual savings (thousands) Useful life (years) Computed IRR (over useful life) A $280 $45.57 10 10% 20 10% $550 $145.09 5 10%
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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