# Equivalent Annual Worth

CONSIDER THE FOLLOWING ESTIMATES, AND USE AN INTEREST RATE OF 10% PER YEAR. THE EQUIVALENT ANNUAL WORTH OF ALTERNATIVE ''A'' IS CLOSEST TO ?

alternatives: ''A'' ''B''

A. $-25,130 First cost $ -50,000 -80,000

B. $-37,100 Annual cost $/year -20,000 -10,000

C. $-41,500 Salvage Value, $ 10,000 25,000

D. $-42,900 Life, years 3 6

Alternative ''B'' is closest to?

A. $-25,130

B. $-28,190

C. $-37,080

D. $-39,100

https://brainmass.com/economics/output-and-costs/equivalent-annual-worth-49253

#### Solution Preview

We first need to find the Present Worth (PW) of the alternatives. For alternative A, the present worth is equal to -50,000-PW(20,000)+PW(10,000). The first cost is not to be discounted. The PW of annual cost can be found by using the PVIFA table since it is an ...

#### Solution Summary

The solution explains then calculation of Equivalent Annual Worth