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Two alternatives, A and B, are under consideration. Both have a life of five years. Alternative A needs an initial investment of $17,000 and provides net revenue of $4,000 per year for five years. Alternative B requires an investment of $19,000 and has annual net revenue of $5,000. All estimates are in actual dollars. Inflation is expected to be 2% per year for the next five years, and the inflation-free (real) MARR is 9.8% per year. Which alternative should be chosen?

Microeconomics, Economics

  • Category:- Microeconomics
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