A firm is considering the following alternatives, as well as a fifth choice: do nothing. Each alternative has a 5-year useful life.
|
1
|
2
|
3
|
4
|
|
Initial cost $100,000
|
$130,000
|
$200,000
|
$330.000
|
|
Uniform annual net income ($000s) 26.38
|
38.78
|
47.48
|
91.55
|
|
Rate of return 10%
|
15%
|
6%
|
12%
|
(a) Construct a choice table for interest rates from 0% to 100%.
(b) The firm's minimum attractive rate of return is 8%. Which alternative should be selected?