Show the negative equivalent worth in the base period

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Reference no: EM131506427

Question: Annual expenses for two alternatives have been estimated on different bases as follows:

Alternative A Alternative B

Annual Expenses Annual Expenses

End of Estimated in Estimated in Real

Year Actual Dollars Dollars with b = 0

1 $120,000 $100,000

2 132,000 110,000

3 148,000 120,000

4 160,000 130,000

If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period?

Reference no: EM131506427

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