Caterpillar Corporation wants to build a spare parts storage facility in the Phoenix, Arizona, vicinity. A plant engineer has identified four different location options. The initial cost of earthwork and prefab building and the annual net cash flows estimates are detailed in Table 8-5. The annual net cash flows series vary due to differences in maintenance, labor costs, transportation charges, etc. If the MARR is 10%, use incremental ROR analysis to select the one economically best location.
Estimates for Four Alternative Building Locations.
|
|
A
|
B
|
C
|
D
|
|
Initial cost, $
|
-200,000
|
-275,000
|
-190,000
|
-350,000
|
|
Annual cash fl ow, $ per year
|
-22,000
|
-35,000
|
-19,500
|
-42,000
|
|
Life, years
|
30
|
30
|
30
|
30
|