e355t2

e355t2 - E 355- Test 2 Solution Spring 2008 2.1 Excel...

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E 355- Test 2 Solution Spring 2008 2.1 Benefits $/yr B 750 720 Dis-Benefits $/yr D 150 220 Initial cost $ I 2500 2000 $/yr C 350 450 User fees $/yr R 150 250 MARR = 18%, N=15 years. a) Calculate the conventional BCR for each alternative. [9 point] Alternative A In order to calculate the BCR, we intially have to annualize the initial cost, I. So, for Alternative A, I ( A/P , i, N) = 2500 ( A/P,18%,15) = 2500 (0.1964) = 491.00 So, Alternative A Conventional B/C Analysis: B = ( B - D ) C I+(C-R) B C = 0.87 Alternative B I ( A/P , i, N) = ( A/P,18%,15) = 2000*(0.1964) = 392.80 So, Conventional B/C Analysis: B = ( B - D ) I Annulalize = Note: Be careful for units while you are doing calculation. Pay attention to the definition of BCR and the formula used. 750-150 491 + (350 - 150) Units Alternative A Alternative B Excel consulting is installing a new system for employees. Mr. Bhatt the CEO of the company considering two alternatives. The following tables summarize the economics of each.
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This note was uploaded on 04/07/2008 for the course E 355 taught by Professor Merino/abel during the Fall '08 term at Stevens.

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e355t2 - E 355- Test 2 Solution Spring 2008 2.1 Excel...

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