Two alternatives are suggested for improvement to a power generation plant. Alternative A costs $60,000 and provides yearly benefit of $16,000. Alternative B requires $84,000 of initial cost. However, it will yield benefits in the order of $22,000 per year.
(a) For the investment period of 3 years and an interest rate of 6%, use the net present worth method and find out which alternative is better.
(b) Repeat Part (a) but use the equivalent uniform annual cost analysis method.
(c) Repeat Part (a) and use the rate of return method and n =5 years.
(d) Considering Alternative A, take the investment period as an unknown and compute the breakeven period. Use i = 6% per year
(e) Repeat Part (d) for Alternative B.