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1) Your company is upgrading their computer systems and you have the option of two different equipment package plans; Plan B $35 000 $25 000
1) Your company is upgrading their computer systems and you have the option of two different equipment package plans; Plan B $35 000 $25 000 $9 000 $1 500 Plan A nitial cost of installation Material and labor saving per year $20 000 Annual operating expenses End-of-useful life scrap value $20 000 $8 000 2 000 The cost of capital to your company is 5%. Use annual cash flow analysis to determine the following: If the useful life of Plan A is 3 years, and the useful life of Plan B is 4 years, what are their equivalent annual values? What happens to their equivalent annual values if both are permanent installations? (lgnore the end-of-useful life scrap value) (5 pts) a) Which option is preferable? (10 pts) b) Tip: include the scrap value as an offset to cost instead of a benefit to simplify calculations)
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