6.

33
AW (10 %) A =−$ 50,000 ( A / P ,10 % ,25 )+ $ 5,000 ( A/ F ,10 % ,25 )−$ 1,200=−$ 6.659

AW (10 %) A =−$ 90,000 ( A/ P , 10 % , 50 )−$ 6,000 ( P/ A ,10 % ,15 )( A /P , 10 % , 50 )−$ 1,000=−$ 14,680

AW (10 %) A
CW (10 %) A = =−$ 66.59
10 %
AW (10 %)B
CW (10 %) B= =−$ 146.80
10 %

We recommend plan A because it has greater CW (lesser negative CW)

6.38
The preferred alternative will minimize the equivalent worth of total costs over
the 18-year analysis period.
To compare two mutually exclusive alternatives, calculate each net present value
(NPV)
NPV = Cash inflows – cash outflows
The useful life of Absorption Chilling is 6 years, the study period is 18 years.
Therefore, the first like (identical) replacement of AC would occur at EOY 6, and
the second would be at EOY 12.
The NPV of Absorption Chilling (AC) is:
NPV AC =−$ 60,000−$ 60,000 ¿

The same we have the NVP of Compression Chilling (CC) is:

NPV CC =−$ 80,000−$ 80,000¿

Since Compression Chilling (CC) has lower Net Present Cost than