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The New Corner Electronics Store wants to introduce a new computer system for its computer service. Development of the new system will take one year

The New Corner Electronics Store wants to introduce a new computer system for its computer service. Development of the new system will take one year at a cost of 50,000. The table below shows the projected costs and benefits for the first six years of operation.

YearCostsBenefits
143,00035,000
237,00037,200
333,30042,000
430,10047,000
530,00050,300
632,00055,000

Do a cost-benefit analysis using the following methods:

a. Cash-flow analysis
b. Present value analysis. Assume the company uses a discount rate of 10% per annum.
c. What is your recommendation for The New Corner Electronics Store?

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Answer The criterion of HicksKaldor states that a project or activity merits consideration or remains desirable when the total benefits exceed the tot... blur-text-image

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