The receiving area for the expansion of a meat processor is under study. The ini

Question

The receiving area for the expansion of a meat processor is under study. The initial Investment and annual operating benefits and costs are very different due to various degrees of automation.

These can be summarized as follows:

$77,000

If the company's MARR is 10%, which alternative should be selected for a ten-year useful life analysis period. Use benefit/cost ratio analysis.

Alternative A Alternative B Alternative C Investment Costs $180,000 $100,000 $280,000 Annual Operating Costs $16,000 $12,000 $28,000 Annual Benefits $53,000 $35,000

$77,000

Explanation / Answer

6.145 is the sum of present values for ten years @ 10%

Alternative A Alternative B Alternative C Investment cost 180000 100000 280000 Total Operating Costs 16000*6.145 12000*6.145 28000*6.145 Total Costs 278313.1 173734.8 452047.9 Total Annual Benefits 530000*6.145 35000*6.145 77000*6.145 Benefit/Cost 1.170128 1.237863 1.046641

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