A shipping firm is considering the purchase of a materials handling system for unloading ships at the dock. The firm has reduced its choice to five different systems, all of which are expected to provide the same unloading speed. The initial costs and the operating costs are estimated for each system as follows.

The life of each system is estimated to be 5 years, and the firm's MARR is 15%. If the firm must select one of the materials handling systems, which one is the most desireable?

a. Solve using the total-investment approach.

b. Solve using an incremental approach.

c. Assuming the cost estimates are in constant dollars and the annual inflation rate is expected to be 9%, which system is preferred?

Transcribed Image Text:

System A B C D E Initial Cost $650,000 780,000 600,000 750,000 720,000 Annual Operating Expenses $91,810 52,569 105,000 68,417 74,945 System A B C D E Initial Cost $650,000 780,000 600,000 750,000 720,000 Annual Operating Expenses $91,810 52,569 105,000 68,417 74,945

Answer rating: 100% (QA)

Ttlinvestment rh Ttl investment f System 650000 918105 1109050 Ttl investment f System B 780000 5256... View the full answer