Your company is considering three mutually exclusive investments as described in the table below. Based on a 15-year study period and 8% MARR, you are tasked to determine which investment should be selected.
Investment Option 1: • Initial Investment: $74,000 • Net Annual Revenue: $10,500 • Salvage Value: $1,000 • Useful Life: 18
Investment Option 2: • Initial Investment: $78,000 • Net Annual Revenue: $10,000 • Salvage Value: $0 • Useful Life: 15
Investment Option 2: • Initial Investment: $68,000 • Net Annual Revenue: $14,000 • Salvage Value: $2,000 • Useful Life: 10 Note: The repeatability assumption cannot be applied.
Hint: imputed market value technique will need to be applied to Investment 1 and assume cotermination at 15-years with reinvestment for Investment 3. What is the PW of the Investment option 1? What is the PW of the Investment option 2? What is the PW of investment option 3?