Problem
Annual expenses for two alternatives have been estimated on different bases as follows:
Alternative A Alternative B
Annual Expenses Annual Expenses
End of Estimated in Estimated in Real
Year Actual Dollars Dollars with b = 0
1 $120,000 $100,000
2 132,000 110,000
3 148,000 120,000
4 160,000 130,000
If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.