Question
Huskies Inc. has decided to acquire a new computer system. After considering several options it has narrowed its search to two systems. Apple System: purchase
Huskies Inc. has decided to acquire a new computer system. After considering several options it has narrowed its search to two systems.
Apple System: purchase cost of $271,307 and operating costs of $21,907 in year 1, $20,579 in year 2, and $23,491 in year 3 (paid at the end of each year).
Dell System: purchase cost of $200,324 and operating costs of $35,485 in year 1, $37,256 in year 2, and $37,033 in year 3 (paid at the end of each year).
Both computer systems have a service life of 3 years. Based on the defender-challenger approach and given that the MARR is 9%, reinvestment rate is 7%, and minimum external rate of return is 6%, compute the incremental Benefit-Cost ratio of choosing the most expensive computer system and then indicate your recommendation as follows: write down as your answer the value of the incremental B-C ratio if your recommendation is the Apple System; write down as your answer 1 (without the commas) if your recommendation is the Dell System. Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas.
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