4) Orpheum Productions in Nevada is considering three mutually exclusive alterna
ID: 1127908 • Letter: 4
Question
4) Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting directors who prefer this lighting style. The cash flow details, in thousands of dollars, for these enhancements are shown in the chart below. MARR is 10%/year (interest table is given in the Equations section). (20 pts.) End of Year Light Bar Sliding Spots Reflected Beam -$12,000-$26,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 -$31,000 so $3,200 $6,400 $9,600 $12,800 $16,000 Based on an annual worth analysis, which alternative (if any) should be implemented? Show al the workExplanation / Answer
Ans:- MARR is 10%/year , According to the question We first calculate the Present value of three mutually exclusive alternatives i.e. Light Bars, Sliding Spots and Reflected Beam .
First we have to calculare the Present value of Light Bars.
In the table already given the data of Light bars with year wise and MARR also given i.e. 10% oer year.
So. PV of Light Bars = -$12,000 + $ 3900(P/A, 10%,6) 10% is MARR & 6 is the No. of years
=-$12000+$3900/(1+10%)^1+3900/(1+10%)^2+3900/(1+10%)^3+3900/(1+10%)^4+3900/(1+10%)^5+3900/(1+10%)^6
= -12000+ 16985.52
= 5785.52
PV of Sliding Spots = -$26,000 + $ 4000(P/A, 10%,6) 10% is MARR & 6 is the No. of years
=-$26000+$4000/(1+10%)^1+4000/(1+10%)^2+4000/(1+10%)^3+4000/(1+10%)^4+4000/(1+10%)^5+4000/(1+10%)^6
= -26000+ 17421.04
= -8578.96
PV of Reflected Beam
=-$31000+$0+3200/(1+10%)^2+6400/(1+10%)^3+9600/(1+10%)^4+12800/(1+10%)^5+16000/(1+10%)^6
= -31000+ 30989.35
= -10.65
Based on the annual worth analysis Light bar should be implemented because it has higher than other two.
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