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When present worth is used to compare mutually exclusive alternatives, they must be compared over

  • A.the life of the shortest alternative only
  • B.an infinite horizon in every case
  • C.the same study period
  • D.their own individual lives

Answer: C

Correct answer: the same study period

Present worth is an absolute quantity, so an alternative evaluated over ten years accumulates more of everything than one evaluated over five, whatever their relative merits. Comparing them on their own lives compares two different questions, which is why either the least common multiple or an explicit study period must be used.

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