Question 1: The engineering team at Manuel's Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel's uses a 4-year planning horizon and a 10 percent per year MARR
a. What is the future worth of each alternative investment?
b. What is the decision rule for judging the attractiveness of investments based on future worth?
c. From which vendor should the new computer system be purchased?
Question 2: The engineering team at Manuel's Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel's uses a 4-year planning horizon and a 10 percent per year MARR.
a. What is the annual worth of each alternative investment?
b. What is the decision rule for judging the attractiveness of investments based on annual worth?
c. From which vendor should the new computer system be purchased?
Question 3: The engineering team at Manuel's Manufacturing, Inc., is planning to purchase an enterprise resource planning (ERP) system. The software and installation from Vendor A costs $380,000 initially and is expected to increase revenue $125,000 per year every year. The software and installation from Vendor B costs $280,000 and is expected to increase revenue $95,000 per year. Manuel's uses a 4-year planning horizon and a 10 percent per year MARR.
a. What is the internal rate of return of each alternative investment?
b. What is the decision rule for judging the attractiveness of investments based on internal rate of return?
c. From which vendor should the new computer system be purchased?