A company needs a modern material handling system for facilitating access to and from a busy warehouse. If the companys management use a MARR (given in the below table for each group) in their economic decisions.

The company found two systems, the first system is a second-hand and the second system is a new system. The economic consequences of both systems are given in the below table for each group.

Make sure that you use the data for your GROUP to answer the following questions: PART1: For the second-hand system alternative:

a) Draw the cash flow for the economic consequences.

b) Find the present worth, annual worth, future worth.

c) Find the internal rate of return.

d) Is the system economically justified? (explain why).

e) Calculate the simple and discounted payback periods.

f) What are the annual savings required for the system to breakeven?

PART 2: Considering the two mutually exclusive alternatives and assume permanent need for the system (repeatability assumption).

a) Using any equivalency analysis technique of your choice (PW or FW or AW), which alternative should the company pick? (explain why)

b) Apply incremental analysis (rate of return technique) to determine the preferred alternative.

c) Determine the unfavorable systems investment cost at which the company would be indifferent between

alternatives. (For example, if when you analyze the problem, you pick the new system, determine the investment cost of the second-hand system that makes it on same level of economic desirability).

using excel guys

Investment cost Annual expenses Annual savings Useful life Salvage value 33 $33,500 $10,500 $20,000 5 years $7,000 Investment cost Annual expenses First year savings Useful life Salvage value $80,000 17500 $30,500 increasing by 750 each year thereafter 10 years $26,000 12% per year