Wayward Airfreight, Inc. has asked you to determine whether they should purchase

Question

1. Wayward Airfreight, Inc. has asked you to determine whether they should purchase a new automatic parcel sorter or whether they should wait to invest their capital. You have obtained the bids shown in the table below.
   Data SHIP-R SORT-OF U-SORT-M Useful Life, Years 7 7 7 First Cost (FC) $184,000 $235,000 $180,000 Salvage Value (SV) $38,300 $44,800 $14,400 Annual Benefit (AB) $75,300 $89,000 $68,000 M&O COST (M&O) $21,000 $21,000 $12,000
   Use incremental rate of return to determine which alternative to choose. Use a MARR of 15%. A. SHIP-R B. Wait (do nothing now) C. SORT-OF D. U-SORT-OF

Wayward Airfreight, Inc. has asked you to determine whether they should purchase a new automatic parcel sorter or whether they should wait to invest their capital. You have obtained the bids shown in the table below.
Data SHIP-R SORT-OF U-SORT-M Useful Life, Years 7 7 7 First Cost (FC) $184,000 $235,000 $180,000 Salvage Value (SV) $38,300 $44,800 $14,400 Annual Benefit (AB) $75,300 $89,000 $68,000 M&O COST (M&O) $21,000 $21,000 $12,000
Use incremental rate of return to determine which alternative to choose. Use a MARR of 15%. A. SHIP-R B. Wait (do nothing now) C. SORT-OF D. U-SORT-OF Wayward Airfreight, Inc. has asked you to determine whether they should purchase a new automatic parcel sorter or whether they should wait to invest their capital. You have obtained the bids shown in the table below.
Data SHIP-R SORT-OF U-SORT-M Useful Life, Years 7 7 7 First Cost (FC) $184,000 $235,000 $180,000 Salvage Value (SV) $38,300 $44,800 $14,400 Annual Benefit (AB) $75,300 $89,000 $68,000 M&O COST (M&O) $21,000 $21,000 $12,000
Use incremental rate of return to determine which alternative to choose. Use a MARR of 15%.
Use incremental rate of return to determine which alternative to choose. Use a MARR of 15%. SHIP-R Wait (do nothing now) SORT-OF U-SORT-OF Data SHIP-R SORT-OF U-SORT-M Useful Life, Years 7 7 7 First Cost (FC) $184,000 $235,000 $180,000 Salvage Value (SV) $38,300 $44,800 $14,400 Annual Benefit (AB) $75,300 $89,000 $68,000 M&O COST (M&O) $21,000 $21,000 $12,000

Explanation / Answer

NPVship-r = -184000+54300*PVIFA(15,7)+38300/1.15^7

NPV sort of = -235000+68000*PVIFA(15,7)+44800/1.15^7

NPV Usort of = -180000+56000*PVIFA(15,7)+14400/1.15^7

Data SHIP-R SORT-OF U-SORT-M Useful Life, Years 7 7 7 First Cost (FC) $184,000 $235,000 $180,000 Salvage Value (SV) $38,300 $44,800 $14,400 Annual Benefit (AB) $75,300 $89,000 $68,000 PVIFA M&O COST (M&O) $21,000 $21,000 $12,000 4.1604 Effective Annual Benefit (AB) $54,300 $68,000 $56,000 PV $240,308.11 $299,749.18 $238,395.89 NPV $56,308.11 $64,749.18 $58,395.89

ANS C-SORT-OF

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