The following two alternative investments are being evaluated at a MARR of 12%.
Alt. P
Alt. Q
Initial cost
$400,000
$600,000
Net annual revenues
$145,000
$175,000
Alt. Q versus P
$200,000
$30,000
Service life (years)
10
10
10
B/C ratio
2.05
1.65
0.85
Which one of the following statements is correct?
A. Alt Q is more economical because the incremental B/C ratio is < 1
B. Alt P is more economical because the incremental B/C ratio is < 1
C. Alt P is more economical because it has the higher B/C ratio
D. Alt Q is more economical because it has a higher initial cost and higher annual revenues
E. Neither alternative is economical because the incremental B/C ratio < 1