5. CARP, Inc. wants to evaluate two methods of shipping their products. flows ar

Question

5. CARP, Inc. wants to evaluate two methods of shipping their products. flows are associated with each alternative: The following cash Method Life (Years) First Cost M&O Cost M&O Gradient Annual Benefit$154,000$303,000 10 $700,000$1,512,000 $18,000 $9,000 10 Cost $900 $775 |Salvage Value $142,000 $210,000 Annual profits are based on amount of products, which can ordinarily be shipped each year as a function of the amount of vehicles or service purchased with the first cost and the M&O costs. Using a MARR of 15%, calculate the equivalent uniform annual cash flow (EUAB-EUAC) for each alternative. Determine the most desirable alternative based on the results.

Explanation / Answer

Calculate EUAW for alternative A :

EUAW = EUAB - EUAC

=[154,000 + 142,000 (A / F, 15%, 10)] - [{700, 000 (A / P, 15%, 10)}

+ [18,000 + 900 ( A / G, 15%, 10)]

=[154,000 + (142 ,000 x (0 .0493))] - [(700,000* (0.1993))

+ [18,000+(900 x (3.383))]

=[154,000 + 7 ,000.6]-[139510 + 18,000 + 3044.7]

= {16 1,000.6 - 160,554.7}

= 445.901

Calculate EUAW for alternative B:

EUAW = EUAB - EUAC

=[303,000 + 2 10,000 (A / F,15%, 20)] -[1,512, 000{(A / P, 15%, 20)} + 9,000 + 775(A / G, 15%, 20)]

=[303,000 + (210,000 x (0.0493)) ] - [(1,512, 000 x (0.1993)) + 9,000 + (775x (3 .383))]

= {[303,000 + 10,353] -[301,341.6 + 9,000 + 2,621.825]}

= [313,353 - 312,963.41]

= 389.575

Therefore, EUAW of alternative A is more than alternative B. Thus, choose alternative A.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.