Discussion
An analyst compares a 5-year and a 10-year alternative on present worth over their own lives and recommends the longer. The recommendation is
Answer: C
Correct answer: unreliable, the horizons being unequal
Present worth accumulates over whatever period is used, so the ten-year alternative gets ten years of discounted benefit against the other’s five. It will usually appear larger regardless of merit. The comparison must be made over a common period, or on annual worth, before the recommendation means anything.
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