What is the annual worth for option A if the initial cost is $100 and there...
What is the annual worth for option A if the initial cost is $100 and there is a uniform annual benefit of $10 for an infinite time frame. Interest rate is 8%. Do not put $ in answer.
Hint: Use equation for infinite time frame: A=P*I and remember cost is negative and that you also have an annual benefit to add to the annual cost associated with this option.
Homework Answers
Benefit from the option A=10 lifetime=10+10/1.08 + 10/1.082 +.....
Benefit=10/1-(1/1.08)=10*1.08/0.08=135
And cost= 100
Thus new worth of the option A=135-100=35
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