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Q3 Zeliens Smart-Tech is considering purchasing a new super-power computer system to improve the data analysis in their Research and Development. Two types of
Q3 Zeliens Smart-Tech is considering purchasing a new super-power computer system to improve the data analysis in their Research and Development. Two types of system are available on the market and the company plans to use the service of either system not more than ten years. The purchase and installation of Supercomputer A is RM 30,000. The annual maintenance cost for this system is RM 2,000 per year and to make sure the system runs effectively, the parts of the system must be changed three times per year, which costs them RM 800 for each replacement. The system would last for five years; at which time it should have no more salvage value. Supercomputer B will cost them RM 40,000. This system has a special requirement during installation. This requirement will require additional software installation and is estimated to cost RM 3,000. The useful life for this system is 10 years with a market value of only 25% from the initial value at the end of life. This system has a special offer from the supplier: Free maintenance cost for one year and the annual maintenance cost of RM 2,200 starts at year 2 until year 10. The annual operating cost for both systems are shown in Table 3. In addition, the company has another option of renting a Standalone Technology System (STS) for RM 13,000 per year with the rental cost increasing by 5% per year. The system is fully maintained by the rental company. Based on the above information: (a) Suggest, with justifications, THREE (3) alternatives available to the company to have a new super-power computer for 10 years including the cash flow diagram illustration. (9 marks) (b) Recommend which alternative appears to be the best at MARR of 10% per year considering Present Worth Method. (26 marks)
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