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In: Economics

Potable water is in short supply in many countries. To address this​ need, two mutually exclusive...

Potable water is in short supply in many countries. To address this​ need, two mutually exclusive water purification systems are being considered for implementation in China. Doing nothing is not an option. Assume the repeatability of cash flows for alternative 1.

a. Use the PW method to determine which system should be selected when MARR​=8% per year.

b. Which system should be selected when MARR​=15% per​ year?

System 1

System 2

Capital investment

​$100,000

​$150,000

Annual revenues

55,000

70,000

Annual expenses

22,000

40,000

MV at end of useful life

20,000

0

Useful life

5 years

10 years

IRR

22.8​%

15.1​%

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