Answered step by step
Verified Expert Solution
Question
1 Approved Answer
3. A manufacturing company is planning to install an air-conditioning system at its main office. The company receives two offers, System A and System B.
3. A manufacturing company is planning to install an air-conditioning system at its main office. The company receives two offers, System A and System B. Both systems are suitable for use by the company. The costs of both systems are tabulated in TABLE Q3. Assume both systems will provide comparable comfort service and will be used for 10 years. Interest rate is 10%. The air-conditioning will only be operated from year 2 onwards. TABLE Q3 No System A (RM) 55,000 System B (RM) 60,000 Main Equipment (to buy at year 0) 12,000 10,000 15,000 12,000 Installation (will be done at year 1) Annual cost of electricity The electricity will be used beginning from year 2. Annual maintenance expense. Maintenance will start from year 3 Overhaul cost during at the end of year 5 10,000 8,000 20,000 15,000 Market value at the end of year 10 5,000 10,000 a. Draw cash flow for system A and system B. [6 marks] b. Evaluate the present worth of System A and System B. (12 marks] C. Recommend the system the company should select. Justify. [2 marks] d. If the cost of annual maintenance increase by RM1,000 every year from year 3 to year 10 for both System A and System B, other costs remain the same as per TABLE Q3, evaluate the present worth of System A and System B. [10 marks]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started