Question: Can't manage to solve this problem, need help. Thank you. Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative
Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below The MARR is 10% per year The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods Investment cost Annual revenue Annual cost Useful life Salvage value Net PW Design Y $140,000 $45,426 S8,494 15 years $14,700 $144,427 Design Z $275,000 $86,819 $28,551 15 years $33,000 $176,091 Based on PW method, Design Z is more economical _ The modified BIC ratio of Design Yis (Round to t,vo decimal places) The modified BIC ration of Design Z is (Round to t,vo decimal places) The incremental BIC ratio is (Round to t,vo decimal places) c. Therefore, based on the BIC ratio method, Design Z is more economical The discounted payback period of Design Y is years (Round to one decimal place) The discounted payback period of Design Z is years (Round to one decimal place) Therefore, based on the payback period method, Design Y would be preferred. (e) Why could the recommendations based on the payback period method be different from the other two methodso because the payback period method ignores the cash flows after the payback period because the payback period gives more weight to the cash flows after the payback period
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