The executives of the XYZ Company are attempting to determine the economically b

Question

The executives of the XYZ Company are attempting to determine the economically best process-control computer to purchase for one of their production lines. The choice has been narrowed to the five mutually exclusive alternatives whose cash flows are presented in Table 9-14. If capital is not rationed and the MARR is 7%, which computer should the company purchase? Ans. C or D Will the result of Problem 9.26 change if the MARR is 10%? 11%? 13%? Ans. no; no; yes (none of the alternatives is acceptable)

Explanation / Answer

NPV(A)= $1371.27 >>NPV(B)= $680.01 >>NPV(C)= $ 3224.79 >>NPV(D)= $ 4031.01 >>NPV(E)= $ 1714.08 so high NPV must be selected best id D let see NPV of D =0 ==> ==> IRR = 12 % so MARR> 12 % gives negative value of best alternative

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