Question

Quantum Logistics, Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama-Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and costs associated with locating in each of the cities has been determined. The life of the warehouse is expected to be 12 years, and MARR is 15%/year. City Initial Cost Net Annual Income Lagrange Auburn Anniston $130,000 $140,000 $450,000 $220,000 $240,000 $435,000 a. What is the annual worth of each site? Lagrange is $1. 196015 x 214170 Auburn is $ 351975 Anniston is $

Answer 1

Answer:

Given

Annual worth of Project = Net Income A - Annual Equivalent for initial cost

Annual Equivalent for Initial cost = P* r/(1-(1+r)^-N)

Where P=initial Investment

r=rate of return

N= Number of years

for Lagrange

P=130000

A=220000

r=15%

N=12 years

Annual worth of Project = A - P* r/(1-(1+r)^-N)

Annual Worth =220000-130000*15%/(1-(1+15%)^-12)= $196017.50

for Auburn

P=140000

A=240000

r=15%

N=12 years

Annual worth of Project = A - P* r/(1-(1+r)^-N)

Annual Worth =240000-140000*15%/(1-(1+15%)^-12)= $214172.69

for Anniston

P=450000

A=$435000

r=15%

N=12 years

Annual worth of Project = A - P* r/(1-(1+r)^-N)

Annual Worth =435000-450000*15%/(1-(1+15%)^-12)= $351983.65