Question

Consider the following three mutually exclusive alternatives with a MARR (Minimum Acceptable Rate of Return) of 8%. Assuming that alternatives B and C are replaced with identical replacements at the end of their useful lives, which alternative should be selected using annual cash flow analysis?

a) Alternative A
b) Alternative B
c) Alternative C
d) The information provided is insufficient to make a decision.

Answer 1

Specific financial data for each alternative is necessary to perform a comparison based on the Minimum Acceptable Rate of Return. Without this information, we cannot choose between the alternatives using annual cash flow analysis, and thus the answer is that the information provided is insufficient.

Step-by-step explanation:

To determine which of the three mutually exclusive alternatives with a MARR (Minimum Acceptable Rate of Return) of 8% should be selected using annual cash flow analysis, we would need specific financial data for each alternative. This would include initial investment costs, annual cash flows, salvage values, and the useful life of each alternative. Without this information, we cannot perform calculations such as Net Present Value (NPV), Equivalent Annual Cost (EAC), or Internal Rate of Return (IRR) to compare the alternatives based on the MARR. Therefore, the answer to this question is d) The information provided is insufficient to make a decision.