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Geek Inc. has decided to acquire a new Web Server. It has three options. IBM: purchase cost of $330,570 and operating costs of $23,231 in
Geek Inc. has decided to acquire a new Web Server. It has three options. IBM: purchase cost of $330,570 and operating costs of $23,231 in year 1 , $25,540 in year 2 , and $24,625 in year 3 (paid at the end of each year). Cisco: purchase cost of $224,551 and operating costs of $36,493 in year 1,$36,917 in year 2 , and $35,412 in year 3 (paid at the end of each year). Sun: purchase cost of $261,193 and operating costs of $24,000 in year 1 . $20,695 in year 2 , and $20,000 in year 3 (paid at the end of each year). Assume that Geek Inc. has a budget of $313,234 for this investment and all web servers have a service life of 3 years. Based on the defenderchallenger approach and given that the MARR is 8%, reinvestment rate is 6%, and minimum external rate of return is 5%, compute the incremental Benefit-Cost ratio of choosing the best web server (in economic terms) and then indicate your recommendation as follows: - answer " 0 " (without the commas) if your recommendation is the IBM server; - answer " 1 " (without the commas) if your recommendation is the Cisco server; - write down as your answer the value of the incremental B-C ratio if your recommendation is the Sun server. Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas. 1.03 margin of error +/0.1
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