A firm is considering moving its manufacturing plant from Chicago to a new location. The industrial engineering department was asked to identify the various alternatives together with the costs to relocate the plant, and the benefits. The engineers examined six likely sites, together with the do-nothing alternative of keeping the plant at its present location. Their findings are summarized as follows:
Plant Location First Cost ($000s) Uniform Annual Benefit ($000s)
Denver $300 $52
Dallas 550 137
San Antonio 450 117
Los Angeles 750 167
Cleveland 150 18
Atlanta 200 49
Chicago 0 0
The annual benefits are expected to be constant over the 8-year analysis period.
(a) Construct a choice table for interest rates from 0% to 100%.
(b)IT the firm uses 10% annual interest in its economic analysis, where should the manufacturing plant be located?