Hillsdale is considering two options for comparable computer software. Option A will cost $27,000 plus annual...
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Hillsdale is considering two options for comparable computer software. Option A will cost $27,000 plus annual license renewals of $1,100 for three years, which includes technical support. Option B will cost $13,000 with technical support being an add-on charge. The estimated cost of technical support is $4,700 the first year, $3,700 the second year, and $2,700 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. The discount rate is 10%. Ignore income taxes. of $1.5YA st a. Calculate the present value of net cash flows. b. Determine which option should be chosen based on present value considerations. Hillsdale is considering two options for comparable computer software. Option A will cost $27,000 plus annual license renewals of $1,100 for three years, which includes technical support. Option B will cost $13,000 with technical support being an add-on charge. The estimated cost of technical support is $4,700 the first year, $3,700 the second year, and $2,700 the third year. Assume the software is purchased and paid for at the beginning of year one, but that technical support is paid for at the end of each year. The discount rate is 10%. Ignore income taxes. of $1.5YA st a. Calculate the present value of net cash flows. b. Determine which option should be chosen based on present value considerations.
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Related Book For
Engineering Economy
ISBN: 978-0133439274
16th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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