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  3. consider the 2 cash flow options below at an inter

Consider the 2 cash flow options below at an interest rate of 10% A B Initial Cost 100,000 120,000 Year Cost 1 1000 1500 Year...

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Economics

Consider the 2 cash flow options below at an interest rate of10%

AB
Initial Cost100,000120,000
Year Cost 110001500
Year Cost 214001800
Year Cost 318002100
Year Cost 422002400
Year Cost 526002700
Year Cost 630003000
Year Cost 734003300
Year Cost 838003600
Year Cost 942003900
Year Cost 1046004200
Year Cost 1150004500
Year Cost 1254004800
Year Cost 1358005100
Year Cost 1462005400
Year Cost 1566005700

Option A stops at 15 years, while option B goes until year 30.The final year of option B is equal to 10200.

Yearly savings for option A is 10000 and for option B is20000.

The salvage value for option A is 5000 and for option B is12000.

Which option is better?

Answer & Explanation Solved by verified expert
3.6 Ratings (393 Votes)
Option A Given P 100000 A1 1000 G 400 n 15 Annual savings 10000 salvage value 5000 i 10 Annual worth of    See Answer
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