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Net present Value

1. Compare the economics of the two following service producing alternatives. Use present worth analysis and incremental analysis. Use NPV at i* = 15% and confirm your answer by calculating the ROR. All numbers are in 1000 of dollars.

Alternative A
C=200 OC=220 OC=220 OC=220 OC=220 L=50 Year 0 Year 1 Year 2 Year 3 Year 4

Alternative B
C=0 OC=300 OC=300 OC=300 OC=300 L=0 Year 0 Year 1 Year 2 Year 3 Year 4

Solution Summary

Net present Value is applied.

$2.19