You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulichoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a presentworth comparison at an interest rate of 14% per year? Why is yours the correct choice?X$-40,000$-12000$1,5005 yearsThe present worth of alternative X is $Alternative (Click to select) is selected by the company.AlternativeFirst CostMaintenance cost, perYearSalvage ValueLifeY$-60,000$-2000$2,5005 yearsand that of alternative Y is $

Present worth of Alternative = First Cost + Present Value of the Maintenance cost per Year - Present…

Answered: The present worth of alternative X is…

The present worth of alternative X is $[ Alternative (Click to select) is selected by the company. and that of alternative Y is $

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic
hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present
worth comparison at an interest rate of 14% per year? Why is yours the correct choice?
X
$-40,000
$-12000
$1,500
5 years
The present worth of alternative X is $
Alternative (Click to select) is selected by the company.
Alternative
First Cost
Maintenance cost, per
Year
Salvage Value
Life
Y
$-60,000
$-2000
$2,500
5 years
and that of alternative Y is $

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