8.13
PW of Benefit = (uniform annual benefit) (P/A, %, years)
Alt A:
PW of Cost = $10,700
PW of Benefit = 2100 (P/A, 10%, 8)
= 2100(5.335)
= 11203.5
Alt B:
PW of Cost = $5500 – (5500)(P/F, 10%,4)
= 9256.5
PW of Benefit = 1800 (P/A, 10%, 8)
= 1800(5.335)
=9603
A,B have ROR greater than 10% = good.
When you graph it, slope is greater than one.
When slope is greater than NPW= 0 line which slope is one, then you choose the one
with higher cost.
Alt A desired.
8.18
Alt A Cost: 100,000
i=1.25%
Alt. B Cost: 100,000
i=15%
Alt. C Cost: 2700/mo
ALT A:
A= P (A/P, 1.25, 60)
350,000(.15)
A= 8,330
PW of Cost
100,000 + 8330(F/A, 1.256, 60) + 1000(P/A, 20%, 60)- 600000(P/F, 1.25%, 60)
100,000 + 8330(88.575) + 1000(5)- 600000(.4746)
= 232,879.75
PW of Benefit
2500(P/A, 20%, 60) = 2500(5)= 12500
ALT B: