Question: A telecommunications firm is considering a product expansion of a popular cell phone. Two alternatives for the cell phone expansion are summarized below. The company uses a MARR of 8% per year for decisions of this type, and repeatability may be assumed. Which alternative should be recommended and why?
Expansion A Expansion B
Capital investment $1,000,000 $1,250,000
Annual revenue $760,000 $580,000
Annual expenses $500,000 $360,000
Salvage value $100,000 $150,000
Useful life 6 years 8 years