AW: Four Asset Types

Suppose you have a choice of four asset types that you will use to provide 24 years of service:

Type A, which lasts 12 years and costs $40;
Type B, which lasts 6 years and costs $22;
Type C, which lasts 4 years and costs $15;
Type D, which lasts 2 years and costs $9

Which is the best way to provide 24 years of service when the MARR is 8%?
Question options:

  • A
  • B
  • C
  • D

A: AW=-40(A|P,i=.08,N=12)= -5.31
B: AW=-22(A|P,i=.08,N=6)= -4.76
C: AW=-15(A|P,i=.08,N=4)= -4.53
D: AW=-9(A|P,i=.08,N=2)= -5.05

Asset C has a greater AW. C is the best option.

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