Annual Expenses for two alternatives have been estimated on different bases as follows. If the average general price inflation rate is expected to be 4% per year and the real rate of interest is 8% per year, show which alternative has the least negative equivalent worth in the base period? End Alternative A Alternative B

of Annual Expenses Annual Expenses

Year Estimated in Estimated in Real

Actual Dollars Dollars with b=0

1 $120,000 $100,000

2 132,000 110,000

3 148,000 120,000

4 160,000 130,000