3. Three mutually exclusive alternatives for implementing an office automation p

Question

3. Three mutually exclusive alternatives for implementing an office automation plan in an engineering design firm are being considered. Each alternative meets the same service requirements, but different in capital investment amounts and benefits exists among them. All has the same life span of 10 years. Alternative Capital Investment $390,000 $920,000 167,000 40,000 $660,000 133,500 20,000 Annual cost savings 69,000 30,000 Salvage @ EOL If the firm's MARR is 10% per year, which alternative should be selected in view of the financial estimates? a. b. What are the Benefit-Cost (B/C) ratios of these alternatives? c. What are the pay-back (P-B) Period values of these alternatives?

Explanation / Answer

Based on NPV Alternative C should be chosen


b)

c)

Best of Luck. God Bless
Please Rate Well

Alternative A A B C D E F G H I J K 1 Year 0 1 2 3 4 5 6 7 8 9 10 2 Capital Investment 390000 3 Annual Cost Savings 69000 69000 69000 69000 69000 69000 69000 69000 69000 69000 4 Salvage Value 30000 5 Total Cash flow -390000 69000 69000 69000 69000 69000 69000 69000 69000 69000 99000 6 MARR 10% NPV 45541.43 Using NPV(A6,B5:K5) Alternative B A B C D E F G H I J K 1 Year 0 1 2 3 4 5 6 7 8 9 10 2 Capital Investment 920000 3 Annual Cost Savings 167000 167000 167000 167000 167000 167000 167000 167000 167000 167000 4 Salvage Value 40000 5 Total Cash flow -920000 167000 167000 167000 167000 167000 167000 167000 167000 167000 207000 6 MARR 10% NPV 121564.44 Using NPV(A6,B5:K5) Alternative C A B C D E F G H I J K 1 Year 0 1 2 3 4 5 6 7 8 9 10 2 Capital Investment 660000 3 Annual Cost Savings 133500 133500 133500 133500 133500 133500 133500 133500 133500 133500 4 Salvage Value 20000 5 Total Cash flow -660000 133500 133500 133500 133500 133500 133500 133500 133500 133500 153500 6 MARR 10% NPV 168010.57 Using NPV(A6,B5:K5)

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.