1. Entertainment Engineers, Inc., is an Ohio-based design engineering fi rm that designs rides for amusement and theme parks all over the world. Two alternative designs are under consideration for a new ride called the Scream Machine at a theme park located in Florida. The two candidate designs differ in complexity, cost, and predicted revenue. The fi rst alternative design (A) will require an investment of $300,000 and is estimated to produce after-tax revenue of $55,000 annually over a 10-year planning horizon. The second alternative design (B) will require an investment of

$450,000 and is expected to generate annual after-tax revenue of $80,000.

A negligible salvage value is assumed for both designs. Theme park management could decide to “do nothing”; if so, the present worth of doing nothing will be zero. An after-tax MARR of 10 percent is used. Which alternative design, if either, should the theme park select?

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(+) (-) 0 $300,000 (-) $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 $55,000 2 3 4 5 6 7 8 9 10 Alternative A $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 $80,000 10 1 2 3 4 5 6 7 8 9 10 $450,000 FIGURE 4.3 CFDs for Example 4.2 Alternative B