Use Present Worth Analysis to determine whether Alternative A or B should be chosen. Items are identically replaced at the end of their useful lives. Assume an interest rate of 6% per year, compounded annually.
Alternative A Alternative B
Initial Cost 350 985
Annual Benefit 80 226
Salvage Value 160 186
Useful Life (yrs) 2 3
A. Alternative B, because it only incurs the initial cost once every three years instead of every two years
B. Alternative B, because it costs $250.00 more than Alternative A, in terms of present worth
C. Alternative A, because its present worth is positive
D. Alternative A, because it costs $250.00 less than Alternative B, in terms of present worth