Two ventilation systems suppliers, Supplier A will have an initial cost of 1600000$, and its operating...

Two ventilation systems suppliers, Supplier A will have an initial cost of 1600000$, and its operating cost is 70000 $ per year, where its life is 4 year with salvage value of 400000 $. Supplier B has an initial cost of 2100000 $ and operating cost of 50000 $ at the ﬁrst year with an increase of $3000 per year thereafter, and its useful life is 8 years with no salvage value.

Use the future worth analysis to determine which system should be selected, the interest rate is 12% per year?

Expert Solution

Here we are required to do the future worth analysis in case of future worth analysis the useful life of the two alternatives must be equal.

Take LCM of their useful life 4 and 8 we get 8 years. Calculating the FW of supplier A

We can determine the value of the factors using the factor table.

Now calculating the future worth of supplier B

Om the basis of FW analysis the supplier B has a lower cost. Select B.

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.

Rahul Sunny answered 2 years ago

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Two ventilation systems suppliers, Supplier A will have an initial cost of 1600000$, and its operating...

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