Homework Answers
Solution :-
Equation for BC analysis is
Present worth of Net benefits / Present worth of Net costs.
where,
Net cost = Initial investment - Salvage Value
Option A :
Net cost = $30000-0 = $30000
$30000 + $8000 (P/A 10%,5)
-$30000 + (8000×3.7908)= $326.4
Option B :
Net cost = $50000-0 = $50000
$50000 + $8000 (P/A 10%,10)
-$50000+(8000×6.1446)= $9156.8
Option C :
Net cost = $70000-2000 = $68000
$68000 + $8000 (P/A 10%,15)
-$68000 + (8000 × 7.606080) = $60,848.64
Thus, Option C Is better than
Option A and Option B.
Because of higher present worth.
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