Consider these two alternatives. (11.2)
Alternative 1 Alternative 2
Capital investment $4,500 $6,000
Annual revenues $1,600 $1,850
Annual expenses $400 $500
Estimated market $800 $1,200
Value Useful life 8 years 10 years
a. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial decision based on these data would be reversed? The annual MARR is 15% per year.
b. Determine the life of Alternative 1 for which the AWs are equal.
11-8. The Ford Motor Company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment (study) period is four years, and MARR is 12% per year. Data for the fixture costs of the systems are as follows.