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The estimates for two alternatives are to be compared on the basis of their perpetual...

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Accounting

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The estimates for two alternatives are to be compared on the basis of their perpetual equivalent annual worth. At an interest rate of 10% per year, what is the perpetual AW of Y1? Alternative First Cost Annual Cost Salvage Value Life (years) X1 -50,000 - 10,000 13,000 3 Y1 -90,000 -4,000 15,000 6 O-12,627 -11,500 -11,056 O-22,721 Your boss has asked you to look into optimizing the van ownership strategy for your company. The company you work for bought a van for $54,600 for making deliveries. You expect the van to be driven 27,300 miles per year, with each mile costing you around $0.63 per mile in the first year. The operating cost per mile is expected to increase by 5% per year after the first year. The resale value of the van is expected to decrease by 20% in the first year and then by 7% per year from there on out. What is the optimal ownership period (economic life) in years assuming a MARR of 9%? 5 years 7 years 2 years 6 years 3 years 4 years 8 years

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