Question

Choose from the methods listed below to properly address the following decision making situations:

-Annualized Cost

-Net Present Cost

-Net present Value

-Internal Rate of Return

-Cost-Benefit Analysis

A. The selection of a computer system from three alternative vendor proposals. each proposal has a different acquisition cost, projected operating costs and estimated useful life.

B. Whether the organization should purchase new facilities and equipment to support the expansion of its counseling program services. The expansion of the counseling program services would involve additional revenues and operating expenses in future years.

C.The organization is planning to acquire a fleet of trucks from a local auto dealership. The dealership is offering your organization the options of leasing versus loan financing and purchase. The proposed lease term is the same as the estimated useful life of the fleet vehicles.

D. The city government is planning to invest $100 million in a new auto plant, where city officials expect their investment to generate future tax revenues and other economic and social benefits.

Answer 1

A. The selection of a computer system from three alternative vendor proposals. each proposal has a different acquisition cost, projected operating costs and estimated useful life. - Annualized Cost

Annualised cost will make the comparison easy between this different alternatives. Project with lowest annualised cost should be selected

B. Whether the organization should purchase new facilities and equipment to support the expansion of its counseling program services. The expansion of the counseling program services would involve additional revenues and operating expenses in future years. = NPV analysis

NPV is nothing but pv of cashinflow less pv of cash outflow

C.The organization is planning to acquire a fleet of trucks from a local auto dealership. The dealership is offering your organization the options of leasing versus loan financing and purchase. The proposed lease term is the same as the estimated useful life of the fleet vehicles. - net present cost

D. The city government is planning to invest $100 million in a new auto plant, where city officials expect their investment to generate future tax revenues and other economic and social benefits.- cost benefit analysis