Given the financial data in the table below for two mutually exclusive alternatives, determine the value "X" for the two alternatives to be equally attractive. Use an interest rate of 9% per year.
$$\begin{array} { | l | l | l | }
\hline & \mathrm { P } & \mathrm { Q } \
\hline \text { Iritial cost } & \$ 2,500 & \$ 4,000 \
\hline \text { Annual benefit } & 400 & \mathbf { X } \
\hline \text { Salvage value } & 1,200 & 1,500 \
\hline \text { Life } & { 5 \text { years } } \
\hline
\end{array}$$

Question

Given the financial data in the table below for two mutually exclusive alternatives, determine the value "X" for the two alternatives to be equally attractive. Use an interest rate of 9% per year.
 $$\begin{array} { | l | l | l | } 
\hline & \mathrm { P } & \mathrm { Q } \
\hline \text { Iritial cost } & \$ 2,500 & \$ 4,000 \
\hline \text { Annual benefit } & 400 & \mathbf { X } \
\hline \text { Salvage value } & 1,200 & 1,500 \
\hline \text { Life } &  { 5 \text { years } } \
\hline
\end{array}$$

Quizplus · Accepted Answer

EUAW (P) = 500- [2,500(A/P, 9%, 5) - 1,200 (A/F, 9%, 5)]
= 500- [2,500(0.2571) - 1,200) (0.1671)]
= $57.77
EUAW (B) = X - [4,000(0.2571) - 1,500(0.1671)]
= X ? 777.75
For the two alternatives to be equally attractive,
X - 777.75 = 57.77
X = $835.52

Given the Financial Data in the Table Below for Two