A company is deciding between two alternative designs. Design A has an initial cost of $95,000. For Design A, the EoY 1 has costs totaling to -$4,000 and EoY 2 total costs are -$17,000. EoY 3, for Design A, will generate $150,000. Design B has an initial cost of -$50,000. For Design B, the EoY 1 has costs totaling to - $2,500 and EoY 2 total costs are -$12,000. EoY 3, for Design B, will generate $120,000. The company must maintain a MARR of 7% to meet inflation and overhead costs. Create cash flow analysis tables and diagrams for both designs.
a) What is the maximum number of positive roots for Design A?
b) What is the maximum number of positive roots for Design B?
c) What is Design A’s IRR?
d) What is Design B’s IRR?
e) Does either design’s IRR exceed the MARR? (Yes, both; Yes, Design ?; or No)
f) Based on the highest IRR, which design is best?