FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of return of 6%. The alternatives are mutually exclusive. Description Company A Company B Company C Company D Initial Cost (RM) 400000 113000 490000 200000 Annual Costs (RM) 900 12000 23000 9000 Net Cash Flows (RM) 100000 31640 122500 46000 IRR 7.9% 124% 7.9% 4.8% Determine the annual benefits of the devices from all four companies. Company A: Format : 400200 Company B: Format : 46980 Company C: Format : 584400 Company D: Format : 67000 Device from which company has the highest annual benefit? Format: A FastBits should reject the bid from which company based on the given individual IRR? Format : A Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Format : A Step 1- Eliminate Company Format : A Step 2 - Rank Company from 1-2-3 Format : x-x-x Step 4 - Incremental IRR first comparison Format : 5.6 Step 5 - Remove Company from selection Format : A Repeat Step 4 - Incremental IRR 2nd comparison Format : 8.9 Step 5 - Choose Company Format: A Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A Format : 79540 PW Company B Format : 40230 PW Company C Format : 24086 PW Company D Format: -5420 Thus, choose Company Format FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of return of 6%. The alternatives are mutually exclusive. Description Company A Company B Company C Company D Initial Cost (RM) 400000 113000 490000 200000 Annual Costs (RM) 900 12000 23000 9000 Net Cash Flows (RM) 100000 31640 122500 46000 IRR 7.9% 124% 7.9% 4.8% Determine the annual benefits of the devices from all four companies. Company A: Format : 400200 Company B: Format : 46980 Company C: Format : 584400 Company D: Format : 67000 Device from which company has the highest annual benefit? Format: A FastBits should reject the bid from which company based on the given individual IRR? Format : A Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Format : A Step 1- Eliminate Company Format : A Step 2 - Rank Company from 1-2-3 Format : x-x-x Step 4 - Incremental IRR first comparison Format : 5.6 Step 5 - Remove Company from selection Format : A Repeat Step 4 - Incremental IRR 2nd comparison Format : 8.9 Step 5 - Choose Company Format: A Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A Format : 79540 PW Company B Format : 40230 PW Company C Format : 24086 PW Company D Format: -5420 Thus, choose Company Format
