There are six alternative ways to improve a production line. The capital costs needed, the extra...
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There are six alternative ways to improve a production line. The capital costs needed, the extra annual OMR costs required and the extra annual benefits generated from the improvement are as follows: 1 2 3 4 5 6 Capital cost of 150,000 170,000 200,000 350,000 500,000 650,000 improvement Extra annual 10,000 12,000 15,000 25,000 40,000 50,000 OMR costs needed Extra annual 41,800 46,500 56,000 93,000 132,000 165,000 benefit generated Assuming the life of the project to be 10 years, and the discount rate to be 12% per annum, 1) find the alternative which gives (a) The highest net annual benefit (b) The highest net present worth, (c) The highest direct B/C ratio 2) Use the incremental benefit-cost ratio method to determine the best alternative. There are six alternative ways to improve a production line. The capital costs needed, the extra annual OMR costs required and the extra annual benefits generated from the improvement are as follows: 1 2 3 4 5 6 Capital cost of 150,000 170,000 200,000 350,000 500,000 650,000 improvement Extra annual 10,000 12,000 15,000 25,000 40,000 50,000 OMR costs needed Extra annual 41,800 46,500 56,000 93,000 132,000 165,000 benefit generated Assuming the life of the project to be 10 years, and the discount rate to be 12% per annum, 1) find the alternative which gives (a) The highest net annual benefit (b) The highest net present worth, (c) The highest direct B/C ratio 2) Use the incremental benefit-cost ratio method to determine the best alternative.
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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