Select the one with the lowest initial investment cost because none of the increments were justified.

What will be an ideal response?


(a) A vs DN: 0 = -30,000(A/P,i*,8) + 4000 + 1000(A/F,i*,8)
Solve for i* by trial and error or spreadsheet
i* = 2.1% (spreadsheet)
Method A is not acceptable
B vs DN: 0 = - 36,000(A/P,i*,8) + 5000 + 2000(A/F,i*,8)
i* = 3.4%
Method B is not acceptable
C vs DN: 0 = - 41,000(A/P,i*,8) + 8000 + 500(A/F,i*,8)
i* = 11.3%
Method C is acceptable

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