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A Company produces and sells three models of generators of different capacities for large power plants. The characteristics of these models are Deluxe Model

 

A Company produces and sells three models of generators of different capacities for large power plants. The characteristics of these models are Deluxe Model Regular model Economy model Price ($) 300,000 200,000 120,000 O&M ($/yr) 7,000 8,500 5,000 Benefits ($/yr) 70,000 55,000 35,000 Salvage ($) 30,000 20,000 10,000 Life (yr) 15 15 15 Questions: 1. The Company's CFO asks you to analyze which is the best choice from the standpoint of a generic client who might want: (A) to maximize the NPW of the investment (precisely identify the values of i at which the potential client's preference would change) or: (B) to select the investment offering the best ROI 2. The Marketing Dept. has determined that the average client would require a MARR of 50% and would experience a cost of capital availability of 5%. Which generator model would you suggest prioritizing for production?

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