Question Ref. No: 3233 FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of retum of 6%. The alternatives are mutually exclusive. Company A Company B Company C Company D Initial Cost (RM) 460000 110000 430000 200,000 Annual Costs (RM) 900 12,000 23,000 9,000 Net Cash Flows (RM) 115000 30800 107500 46,200 IRR 7.9% 12.4% 7.9% 5% Format: Determine the annual benefits of the devices from all four companies. Company A: 558900 Format: Company B: 39200 Format : Company C 260300 Format : Company D: 39800 Format : Device from which company has the highest annual benefit? Format: FastBits should reject the bid from which company based on the given individual IRR? A Using incremental internal rate of retum analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% Format : and 12% interest rates. Understood? (Y/N) A Format : Step 1. Eliminate Company Format : Step 2 - Rank Company from no 1-2-3 Format: Step 4 - Incremental IRR first comparison 3.8 Format : Step 5 - Remove Company from selection A Format : Repeat Step 4 - Incremental IRR 2nd comparison 9.9 Format : Step 5 - Choose Company A Format : Show that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A 57637 24426 Format: PW Company B 24286 Format : PW Company C 45563 Format: PW Company D -9725 Format: Thus, choose Company Question Ref. No: 3233 FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and a minimum attractive rate of retum of 6%. The alternatives are mutually exclusive. Company A Company B Company C Company D Initial Cost (RM) 460000 110000 430000 200,000 Annual Costs (RM) 900 12,000 23,000 9,000 Net Cash Flows (RM) 115000 30800 107500 46,200 IRR 7.9% 12.4% 7.9% 5% Format: Determine the annual benefits of the devices from all four companies. Company A: 558900 Format: Company B: 39200 Format : Company C 260300 Format : Company D: 39800 Format : Device from which company has the highest annual benefit? Format: FastBits should reject the bid from which company based on the given individual IRR? A Using incremental internal rate of retum analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% Format : and 12% interest rates. Understood? (Y/N) A Format : Step 1. Eliminate Company Format : Step 2 - Rank Company from no 1-2-3 Format: Step 4 - Incremental IRR first comparison 3.8 Format : Step 5 - Remove Company from selection A Format : Repeat Step 4 - Incremental IRR 2nd comparison 9.9 Format : Step 5 - Choose Company A Format : Show that the same company selection would be made with proper application of the Present Worth (PW) method. PW Company A 57637 24426 Format: PW Company B 24286 Format : PW Company C 45563 Format: PW Company D -9725 Format: Thus, choose Company
