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MTU is considering acquiring a new industrial carpet cleaner machine. It has three options. Clean Smart: purchase cost of $345,743 and operating costs of $21,254
MTU is considering acquiring a new industrial carpet cleaner machine. It has three options. Clean Smart: purchase cost of $345,743 and operating costs of $21,254 in year 1, $29,048 in year 2, and $23,665 in year 3 (paid at the end of each year). Shining Floor: purchase cost of $209,289 and operating costs of $35,431 in year 1, $36,297 in year 2, and $35,964 in year 3 (paid at the end of each year). Spring Breeze: purchase cost of $252,379 and operating costs of $24,787 in year 1, $21,449 in year 2, and $20,000 in year 3 (paid at the end of each year). Assume that MTU has a budget of $311,006 for this investment and all carpet cleaners have a service life of 3 years. Based on the defender-challenger approach and given that the MARR is 8%, reinvestment rate is 5%, and minimum external rate of return is 6%, compute the incremental Benefit-Cost ratio of choosing the best carpet cleaner (in economic terms) and then indicate your recommendation as follows: - answer "O" (without the commas) if your recommendation is the Clean Smart; - answer 1 (without the commas) if your recommendation is the Shining Floor; - write down as your answer the value of the incremental B-C ratio if your recommendation is the Spring Breeze. Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas. MTU is considering acquiring a new industrial carpet cleaner machine. It has three options. Clean Smart: purchase cost of $345,743 and operating costs of $21,254 in year 1, $29,048 in year 2, and $23,665 in year 3 (paid at the end of each year). Shining Floor: purchase cost of $209,289 and operating costs of $35,431 in year 1, $36,297 in year 2, and $35,964 in year 3 (paid at the end of each year). Spring Breeze: purchase cost of $252,379 and operating costs of $24,787 in year 1, $21,449 in year 2, and $20,000 in year 3 (paid at the end of each year). Assume that MTU has a budget of $311,006 for this investment and all carpet cleaners have a service life of 3 years. Based on the defender-challenger approach and given that the MARR is 8%, reinvestment rate is 5%, and minimum external rate of return is 6%, compute the incremental Benefit-Cost ratio of choosing the best carpet cleaner (in economic terms) and then indicate your recommendation as follows: - answer "O" (without the commas) if your recommendation is the Clean Smart; - answer 1 (without the commas) if your recommendation is the Shining Floor; - write down as your answer the value of the incremental B-C ratio if your recommendation is the Spring Breeze. 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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