Equipment Purchase
Use the Table shown below to determine which equipment (alternative A or B)
is preferred if the firm's interest rate is 15%. Compute the NPW for each
alternative and answer the questions that follow.
Table for Alternatives A and B
Alternative
A
B
First cost
$45,000
$35,000
Annual O&M
3,900
4,200
Salvage value
0
5,000
Overhaul (Year 6)
10,000
Not required
Life, in years
10
5