Suppose that you are evaluating two different alternatives.
The inflated cost stream for:
Alternative A Alternative B
Year 1 = $ 8,000 $10,000
Year 2 = $ 9,000 $12,000
Year 3 = $12,000 $10,000
Year 4 = $12,000 $ 9,000
Year 5 = $13,000 $ 9,000
Assume that the cost of capital is 12%.
1) Which alternative should be selected?
2) At what point in time with the selected alternative assume a poitn of preference over the other (i.e. break-even point)