Question

Your answer is partially correct. Try again. 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 Lagrange Auburn Anniston Initial Cost Net Annual Income $ 290,000 $ 420,000 $ 590,000 $ 345,000 $ 150,000 $ 435,000 a. What is the annual worth of each site? 366504| Lagrange is $ * 236164 Auburn is $ Anniston is $ 407330 b. What is the decision rule for determining the preferred site based on annual worth ranking? Select the project with the highest AW c. Which city should be recommended? Anniston d. Determine which city should be recommended based on an incremental annual worth analysis. TAnniston (Round answers to the nearest dollar; tolerance is +/-2.00)

Answer 1

Net Present worth meas Current value of all the future cash flows. Present worth will be calculated using to formula given below. IL NPW = cto I where: CFO & CFI 2 n a a Intial cash flow at too Cash flow at t=1 No. of years ago discount rate using the above formula . The Neet Present worth of different sites would be as under I City - Langrangen Years CF (S) PWAF 15% & PW ($) 0 - 290000 1.00 - 290000 1 to 12 420000 5.4206 2276660 Net present worth $198 6660 -Auburn. Yean CF (S) ou PWAF 15% -590000 1.00 1to12 - 345000 - 5.402 o Net Present worth and Pool$2 . -590000 1870114 $ 1280114

Page Date t City Years 0 Anniston alul CFCS) PWAF 15% -150000 -150 000 1.00 435000 5.4206 PWCB) - 150000 2358135 1 to 12 Net Present worth & 2208135 (2) for All Calculation of Annual worth the three sites a Awan NPW PWAF 15., 12 years Langrange Lang Yanee = $1986.660 5.4206 - $ 3,66 500 Auburn $236156 $ 128olly 5.4206 $ 2208135 5.4206 Anniston a - $ 407330 (6) Project having highest positive should be selected. Based on comparing method. Annual worth Annual worth

(C): Anniston city is recommended for constructions of New warehouse because it has the highest Annual worth over the other two location. Hence. at should be selected. (d) Anniston City is recommended for construction. of Neal ware house. Increamental Annual worth of Anniston over the other two locations would be as under: Increamental .A Nw from langrage = $407330-366500 - $40830 Increamental Aw from Auburn & $407330-236156 = $171124