Reconsider the data from Problem 57 (Orpheum Productions lighting enhancement). Assume that any money not invested in the lighting enhancements will be placed in an interest-bearing account earning MARR and will be used for future studio modernization projects.

Data from problem 57

Orpheum Productions in Nevada is considering three mutually exclusive alternatives for lighting enhancements to one of its recording studios. Each enhancement will increase revenues by attracting directors who prefer this lighting style. The cash flow details, in thousands of dollars, for these enhancements are shown in the chart below.

MARR is 10 percent/year. Based on a future worth analysis, which alternative (if any) should be implemented?

 

a. Use the total portfolio approach to examine the future worth of each alternative.

b. Compare the future worth results from Problem 57 with your FW results for part (a). Explain your conclusions from this comparison.

Transcribed Image Text:

End of Year Light Bar Sliding Spots Reflected Beam 0 -$6,000 -$14,000 -$20,000 1 $2,000 $3,500 $0 2 $2,000 $3,500 $2,300 3. $2,000 $3,500 $4,600 4 $2,000 $3,500 $6,900 in 5 $2,000 $3,500 $9,200 6 $2,000 $3,500 $11,500