Question 14.4: The Waygate Corporation is interested in evaluating a major ...
The Waygate Corporation is interested in evaluating a major new video display technology (VDT). Two competing computer companies have approached Waygate with proposals to develop the technology. Waygate believes that both companies will be able to deliver equivalent products at the end of a five-year period. From the yearly development costs of the VDT for each firm, determine which Waygate should choose if the corporate MARR (investment market rate) is 25\% and price inflation is assumed to be 3.5\% per annum over the next five years. Company Alpha costs: Development costs will be \$150,000 the first year and will increase at a rate of 5\% over the five-year period. Company Beta costs: Development costs will be a constant \$150,000 per year in terms of today’s dollars over the five-year period.
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