Alfredo Auto Parts has two options for increasing efficiency. They can expand th

Question

Alfredo Auto Parts has two options for increasing efficiency. They can expand the current building or keep the same building but remodel the inside layout. For a five-year study period, the cash flows for the two options are shown below. Construct a spreadsheet that will calculate the present worth for each option for a variable MARR. By trial and error, determine the MARR at which the present worths of the two options are equivalent.

Expansion Option Remodelling Option Disburse- Net Cash Disburse- Net Cash Year ments Flow ments Receipts eceipts OW 850 000 850 000 230 000 E230 000 9000 80 000 25 000 30 000 35 000 40 000275 000 45 000 200 000 225 000 250 000 175 000 195 000 215 000 235 000 255 000 71 000 68 300 64 790 60 227 54 295 11 70080 000 15 210 5210 80000 1977380 000 300 000 25 70580 000

Explanation / Answer

By trial and Error The approximate MARR = 6.2%

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