Four designs for a product and their associated costs are presented in the following table: a...

Four designs for a product and their associated costs are presented in the following table:

	a	b	c	d
investiment	170000	260000	300000	330000
receipt	114000	110000	130000	147000
disbursements	70000	71000	64000	79000

A 10-year life is used and a 10% MARR (before taxes). which is an expected rate of return from other investiments risk, is required.

Based upon cash flow, which of these four alternatives appears to be most attractive?

Expert Solution

The NPV is computed for determining the profitability of each option

NPV= - Initial cost + Net Annual cash flow*(P/A,10%,10 years)

The (P/A,10%,10 years) = 6.145 as per compound interest table

	a	b	c	d
investiment	170000	260000	300000	330000
receipt	114000	110000	130000	147000
disbursements	70000	71000	64000	79000
Net receipts	44000	39000	66000	68000
NPV	100380	-20345	105570	87860

Option C is most attractive since it has the largest NPV.

jeff jeffy answered 2 years ago

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