Unformatted text preview: Problem 2: (This is the same problem on PS 11) A consulting firm proposed three possible improvements on a dilapidated service facility. The alternatives given ranged from band-aid to long-term solutions wherein the details are summarized in the tables below: A B C Capital Investment 30,000 20,000 50,000 Useful Life 2 3 5 Annual Expenses 1,000 4,000 2,500 Market Value 2,500 10,000 a) Which deal proposal would minimize long term expenses? b) How much discount (to the capital investment cost) should be applied to the “losing” alternatives so that it would be equally attractive with the best alternative? (Use the co-terminated assumption)....
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- Spring '11
- Capital Investment, long term expenses, capital investment cost, total revenue equation, dilapidated service facility.