To find the optimal alternative using the Annual Worth Criterion, we

need to calculate the present worth of all cash flows for each alternative
and then find the Annual Worth (AW) for each. The alternative with the
.highest AW will be the optimal choice

First, let's calculate the present worth (PW) of all cash flows for each
alternative. We'll use a discount rate of 7% per year, as given in the
.problem

:For Alternative X
PW of FC = 15000/(1+0.07)^0 = 15000
PW of OC = 1400/(1+0.07)^1 + 1400/(1+0.07)^2 + 1400/(1+0.07)^3 +
1400/(1+0.07)^4 = 5014.05
PW of Cost = 1300/(1+0.07)^1 + 1300/(1+0.07)^2 + 1300/(1+0.07)^3 +
1300/(1+0.07)^4 = 4638.70
PW of Income = 2000/(1+0.07)^1 + 2000/(1+0.07)^2 + 2000/(1+0.07)^3
+ 2000/(1+0.07)^4 + 2000/(1+0.07)^5 + 2000/(1+0.07)^6 = 10301.14

Total PW of Alternative X = 15000 + 5014.05 - 4638.70 + 10301.14 =

24076.49

:For Alternative Y
PW of FC = 25000/(1+0.07)^0 = 25000
PW of OC = 1000/(1+0.07)^1 + 1000/(1+0.07)^2 + 1000/(1+0.07)^3 +
1000/(1+0.07)^4 = 3563.86
PW of Cost = 1100/(1+0.07)^1 + 1100/(1+0.07)^2 + 1100/(1+0.07)^3 +
1100/(1+0.07)^4 = 3921.88
PW of Income = 1700/(1+0.07)^1 + 1700/(1+0.07)^2 + 1700/(1+0.07)^3
+ 1700/(1+0.07)^4 + 1700/(1+0.07)^5 + 1700/(1+0.07)^6 = 7576.16
Total PW of Alternative Y = 25000 + 3563.86 - 3921.88 + 7576.16 =
25118.14

Next, we can calculate the Annual Worth (AW) for each alternative using
:the following formula

AW = (PW of Income - PW of Cost - PW of OC)/AW factor

:where AW factor is given by

AW factor = (1 - (1+i)^(-n))/i

.Here, i is the discount rate and n is the number of years

:For Alternative X
AW factor = (1 - (1+0.07)^(-10))/0.07 = 5.3307
AW = (10301.14 - 4638.70 - 5014.05)/5.3307 = 542.46

:For Alternative Y
AW factor = (1 - (1+0.07)^(-10))/0.07 = 5.3307
AW = (7576.16 - 3921.88 - 3563.86)/5.3307 = 332.90

Finally, we can compare the AW values for each alternative and conclude
that Alternative X has the higher AW and is therefore the optimal choice
.according to the Annual Worth Criterion