Consider the following after-tax cash flows:
n A B
0 -2500 -5000
1-6 2000 2500
7 2000 0
MARR is 10% (compounded annually)
(a) Compute the future worth’s of the projects at the end of period 7.
(b) Assume that the required service period is seven years and that the company is considering a comparable equipment that has an annual lease expense of $10,000 for period seven (to be paid at the end of year 7), if project B is chosen. This will result in an income of $12,500 at the end of period 7. Which project is the better choice, using present worth as the criteria?