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 Initial Cost (RM) Company A Company B Company C Company D 400000 113000 490000 200000 12000 23000 9000 Annual Costs (RM) 900 Net Cash Flows (RM) 100000 31640 122500 46000 7.9% 12.4% 7.9% IRR Determine the annual benefits of the devices from all four companies. Company A: Company B: Company C: Company D: Device from which company has the highest annual benefit? FastBits should reject the bid from which company based on the given individual IRR? 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) Step 1- Eliminate Company Step 2-Rank Company from Step 4 - Incremental IRR first comparison Step 5 - Remove Company from selection Repeat Step 4 - Incremental IRR 2nd comparison Step 5 - Choose Company Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A PW Company B PW Company C PW Company D 4.8% Format: 400200 Format : 46980 Format: 584400 Format : 67000 Format : A Format : A Format : A Format : A Format : X-X-x Format : 5.6 1-2-3 Format : A Format : 8.9 Format : A Format : 79540 Format : 40230 Format : 24086 Format : -5420 Thus, choose Company Tormot: A