This problem requires the development of a spreadsheet and associated scatter chart to answer the economic questions. As you came to work this morning, your department head asked you to perform an analysis of installing MAP/TOP in the manufacturing planning division of the company. (MAP/TOP is a business and manufacturing environment communications integration software system developed by Boeing Computer Services.) The entire system would be implemented and operated by one of two consultant groups, Hi Tone or Extra-S. Estimates have been developed, but the first cost (includes MAP/TOP software, hardware, implementation and training costs) that your company will agree to pay is still in question. The possible variation of the initial first cost estimate P included in the consultants€™ proposals is indicated below as a percentage of P.

(a) Develop the spreadsheet accompanied by a scatter chart that graphs the AW values versus the possible variations in first cost shown as percentage changes from 100% of P (in 10% increments). Use i = 10% per year.

(b) Select the better alternative under the following negotiated conditions:

1. Company agrees to 100% of P for Hi
Tone and 110% of P for Extra-S
2. Company agrees to 110% of P for Hi
Tone; Extra-S increases first cost to 130% of P

3. Company agrees to 100% of P for both consultants
4. Company agrees to 100% of P for Hi
Tone; Extra-S agrees to 90% of P

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Consultant First cost estimate P, $ Variation in P, % Hi Tone Extra-S -750,000 From 80% to 130% of P -500,000 From 100% to 130% of P AOC, $/year Salvage value, $ Life of contract, years -120,000 240,000 5 -150,000 125,000 3