Two proposals have been offered for streamlining the business operations of a customer call center. Proposal A has an investment cost of $30,000, an expected life of 5 years, property taxes of $450 per year, and no market value. Annual expenses are estimated to be $6,000. Proposal B has an investme

Question

Two proposals have been offered for streamlining the business operations of a customer call center. Proposal $A$ has an investment cost of $\$ 30,000$ , an expected life of 5 years, property taxes of $\$ 450$ per year, and no market value. Annual expenses are estimated to be $\$ 6,000$ . Proposal B has an investment cost of $\$ 38,000$ , an expected life of 4 years, property taxes of $\$ 600$ per year, and no market value. Its annual operating expenses are expected to be $\$ 4,000$ .

Using a MARR $=10 \%$ per year, which proposal should be recommended?

Use the AW method and state your assumption(s). (6.5)

Using a MARR [latex]=10 \%[/latex] per year, which proposal should be recommended?

Use the AW method and state your assumption(s). (6.5)

Accepted Answer

Assume repeatability.

[latex]\begin{aligned}&A W_{\mathrm{A}}(10 \%)=-\$ 30,000(A / P, 10 \%, 5)-\$ 450-\$ 6,000=-\$ 14,364 \&A W_{\mathrm{B}}(10 \%)=-\$ 38,000(A / P, 10 \%, 4)-\$ 600-\$ 4,000=-\$ 16,589\end{aligned}[/latex]

Recommend Proposal [latex]A[/latex], assuming a proposal must be chosen.

Question 6.T-Y-S.K: Two proposals have been offered for streamlining the busines...

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