Question
Two alternative designs are under consideration for a new ride called the Scream Machine at a theme park located in Florida. The two Candidate designs
Two alternative designs are under consideration for a new ride called the Scream Machine at a theme park located in Florida. The two Candidate designs differ in complexity, cost, and predicted revenue. The first design alternative A will require an investment of $300,000 and is estimated to produce after-tax revenue of $55,000 annually over a 10-year planning horizon. The second alternative design (B) will require an investment of $450,000 and is expected to generate annual after-tax revenue of 80,000 over a 10-year planning horizon. A negligible salvage value is assumed for both designs. Theme park management could decide to “do nothing”. Based on an after tax MARR of 10% and an IRR comparison, which design if either should be chosen?
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Engineering Economy
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