Question

The Ford Motor Company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment period is four years (equal lives), and the MARR is 12% per year. Data for fixturing costs of the systems are given below. Which alternative should the company select? antering three mutually exclusive electronic stability control systems in Alternative A B IRR 19.2% 18.0% 23.0% Capital Investment $12,000 $15,800 $8,000 Annual Receipts Less Expenses $4,000 $5,200 $3,000 Salvage Value $3,000 $3,500 $1,500 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. The AW of the alternative A is $ . (Round to the nearest dollar.)

Answer 1

AW of A = -12000 * (A/P, 12%,4) + 4000 + 3000 * (A/F, 12%,4)

= -12000 * 0.329234 + 4000 + 3000 * 0.209234

= 676.89 ~ 677 (Nearest Dollar)

AW of B = -15800 * (A/P, 12%,4) + 5200 + 3500 * (A/F, 12%,4)

= -15800 * 0.329234 + 5200 + 3500 * 0.209234

= 730.42 ~ 730 (Nearest Dollar)

AW of C = -8000 * (A/P, 12%,4) + 3000 + 1500 * (A/F, 12%,4)

= -8000 * 0.329234 + 3000 + 1500 * 0.209234

= 679.98 ~ 680 (Nearest Dollar)

As AW of B is highest, it should be selected