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?

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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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