Consider the following two mutually exclusive alternatives:
Alternative 1 Alternative 2
Cost $9,000 $12,500
Uniform annual benefit 1,300 1,900
Useful life, in years forever 12
Alternative 2 may be replaced with an identical item every 12 years at the $12,500 cost and will have the $1,900 uniform annual benefit. Assume a 10% interest rate and you must use annual cash flow analysis. What is the equivalent uniform annual worth of each alternative?
Answers:
Reasoning/Work: