The rate of return on the incremental investment

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Alternative Uno has a first cost of $10,000 and annual expenses of $3,000, whereas Alternative Dos has a first cost of $35,000, annual expenses of $2,000, and a recurring cost of $5,000 every 10 years. If both alternatives have an infinite life, which of the following equations can be used to solve for the rate of return on the incremental investment?

a) 0 = -$25,000 + $1,000/i - $5,000(A/F, i, 10)

b) 0 = -$25,000 + $1,000/i + $5,000(A/P, i, 10)/i

c) 0 = -$25,000 + $1,000/i - $5,000(A/F, i, 10)/i

d) 0 = +$25,000 - $1,000/i + $5,000(A/F, i, 10)

Reference no: EM131108715

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