Answer:
D. Alternative A, because it costs $250.00 less than Alternative B, in terms of present worth.
Explanation:
Net Present Worth of Alternative A:
-350 + 80 * (P/A, 6%, 6) - (350 - 160) * (P/F, 6%, 2) - (350 - 160) * (P/F, 6% , 4) + 160 * (P/F, 6% , 6)
= -350 + 80 * 5.41791 - (340 - 160) * 0.942596 - (350 - 160) * 0.888487 + 160 * 0.837484
NPW = $ -429.39
Net Present Worth of Alternative B:
-985 + 226 * (P/A, 6%, 6) - (985 - 226) * (P/F, 6%, 3) - (985 - 186) * (P/F, 6% , 4) + 186 * (P/F, 6% , 6)
= -985 + 226 * 5.41791 - (985 - 186) * 0.942596 - (985 - 186) * 0.888487 + 186 * 0.837484
NPW = $ -657.24
