Nationwide Children\'s Hospital is evaluating different proposals to improve chi

Question

Nationwide Children's Hospital is evaluating different proposals to improve children's comfort during MRIs. The Hospital's engineering committee selected two finalists. Both proposals call for the installation of new scanners that have better programming. The CEO of the hospital needs a recommendation. Perform B/C analysis at 6% per year. Vendor A proposes Vendor B proposes First cost to build the system is $700,000. First cost to build the system is $1,350,000 M&O; cost per year is $120,000 Annual benefits is $530,000 Annual disbenefits is $200,000 Life is 14 years M&O; cost per year is $200,000 Annual benefits is $750,000 Annual disbenefits is $300,000 Life is 20 years · . · ·

Explanation / Answer

Vendor A B Initial Cost A         (7,00,000)         (13,50,000) Annual M& O B         (1,20,000)            (2,00,000) Annual Benefits C           5,30,000              7,50,000 Annual Disbenefits D         (2,00,000)            (3,00,000) Net Saving E=C-B-D           2,10,000              2,50,000 Life (Years) F                       14                          20 Discount Factor G          9.294984           11.469921 Present Value H=E*G         19,51,947            28,67,480 B/C Analyasis I=H/A                 2.788                    2.124 Option A is better as it has higher B/C 2.788 Calculation of Discount Factor Year =1/(1+0.06)^n 1 0.943396226 2 0.88999644 3 0.839619283 4 0.792093663 5 0.747258173 6 0.70496054 7 0.665057114 8 0.627412371 9 0.591898464 10 0.558394777 11 0.526787525 12 0.496969364 13 0.468839022 14 0.442300964 9.294984 15 0.417265061 16 0.393646284 17 0.371364419 18 0.350343791 19 0.33051301 20 0.311804727 11.469921

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