Problem 2.4 (25 points) Your company is upgrading the breakroom and kitchen. It is going to include an expresso machine, a fridge with compartments for each employee, a sink, microwave, toaster oven, tables chairs, a rock wall, snacks for everyone, and maybe some other bells and whistles. Your managers think that by updating this area employees will not take as long of lunches. They understand this purchase will be at a cost. You are tasked with considering two different options and presenting them to management. Use a 5% interest rate. First Cost Annual Maintenance Cost Salvage Value Life Years Walmart Kit $40,000 $10,000 $12,000 Target $65,000 $12,000 $25,000 a. Using NPW (Net Present Worth Analysis) analysis determine which kitchen kit you should choose. (8 points) b. Using EUAW (Equivalent Uniform Annual Worth) analysis determine which kitchen kit you should choose. (8 points) C. You really want the Target kit because it looks nicer and has more bells and whistles. You are willing to keep these products around for longer and therefore extend the lives of these products. Perform the analysis to show that the Target option is the better choice. (5 points) d. Now from your analysis in part b think about how ethical presenting this information to management would be. Write 2-3 sentences about how you would present this information in a way that showed your bias. You will be graded on your ability to consider two options in an ethical comparison and how you perceive your bias. (4 points) Problem 2.5 (15 points) The Florida Department of Agriculture & Consumer Services is investigating two proposals for increasing the capacity of the drainage canal in an agricultural region. Proposal A requires removing weeds and sediment that have accumulated during previous years. The dredging equipment costs $650,000 to purchase. The equipment is expected to have a 10-year life with a $17,000 salvage value. The annual operating costs are estimated to be $50,000. To control weeds in the canal, an additional $120,000 is required per year for the weed control program. Proposal B is to line the canal with concrete at an initial cost of $4 million. The lining is assumed to be permanent, but maintenance will be required at a cost of $5,000 each year. In addition, lining repairs will be made every 5 years at a cost of $30,000. Compare the alternative using the EUAW with an interest rate of 5% per year. State which is the better alternative and provide one sentence explaining why. Problem 2.4 (25 points) Your company is upgrading the breakroom and kitchen. It is going to include an expresso machine, a fridge with compartments for each employee, a sink, microwave, toaster oven, tables chairs, a rock wall, snacks for everyone, and maybe some other bells and whistles. Your managers think that by updating this area employees will not take as long of lunches. They understand this purchase will be at a cost. You are tasked with considering two different options and presenting them to management. Use a 5% interest rate. First Cost Annual Maintenance Cost Salvage Value Life Years Walmart Kit $40,000 $10,000 $12,000 Target $65,000 $12,000 $25,000 a. Using NPW (Net Present Worth Analysis) analysis determine which kitchen kit you should choose. (8 points) b. Using EUAW (Equivalent Uniform Annual Worth) analysis determine which kitchen kit you should choose. (8 points) C. You really want the Target kit because it looks nicer and has more bells and whistles. You are willing to keep these products around for longer and therefore extend the lives of these products. Perform the analysis to show that the Target option is the better choice. (5 points) d. Now from your analysis in part b think about how ethical presenting this information to management would be. Write 2-3 sentences about how you would present this information in a way that showed your bias. You will be graded on your ability to consider two options in an ethical comparison and how you perceive your bias. (4 points) Problem 2.5 (15 points) The Florida Department of Agriculture & Consumer Services is investigating two proposals for increasing the capacity of the drainage canal in an agricultural region. Proposal A requires removing weeds and sediment that have accumulated during previous years. The dredging equipment costs $650,000 to purchase. The equipment is expected to have a 10-year life with a $17,000 salvage value. The annual operating costs are estimated to be $50,000. To control weeds in the canal, an additional $120,000 is required per year for the weed control program. Proposal B is to line the canal with concrete at an initial cost of $4 million. The lining is assumed to be permanent, but maintenance will be required at a cost of $5,000 each year. In addition, lining repairs will be made every 5 years at a cost of $30,000. Compare the alternative using the EUAW with an interest rate of 5% per year. State which is the better alternative and provide one sentence explaining why
