Scenario
4.6
Burdell
Labs
is
a
diagnostic laboratory
that
does
various
tests
(blood
tests,
urine
tests,
etc.)
for
doctors'
offices
in
the
Indianapolis
area.
Test
specimens
are
picked
up
at
the
doctors'
offices
and
are
transported
to
the
testing
facility,
with
uniform
arrivals
throughout
the
day.
All
tests
go
through
two
testing
centers
in
the
testing
facility,
Test
Center
A and
Test
Center
B.
A
has
a
current
capacity
of
1,000
units
per
week,
and
B
is
capable
of
1,500
units
per
week.
The
facility
operates
50
weeks
per
year.
This
year
(year
0),
test
volumes
are
expected
to
reach
1,000
units
per
week.
Growth
per
week
is
projected
at
an
additional
200
units
through
year
5
(i.e.,
1,200
per
week
in
year
#1,
1,400
per
week
in
year
#2,
etc.).
Pre-tax
profits
are
expected
to
be $5
per
test
throughout
the
5-year
planning
period.
Two
alternatives
are
being
considered:
1)
Expand
both
Test
Centers
A
and
B
at
the
end
of
year
0
to
a
capacity
of
2,000
units
per
week,
at
a
total
cost
for
both
Test
Centers
of
$300,000;
Expand
Test
Center
A
at
the
end
of
year
O
to
1,500
units
per
week,
matching
Test
Center
B,
at
a
cost
of
$100,000,
then
expanding
both
Test
Centers
to
2,000
units
per
year
at
the
end
of
year
3,
at
an
additional
cost
at
that
time
of
$250,000.
2)
Burdell
Labs
will
not
consider
projects
that
don't
show
a
5th
year
positive
net
present
value using
a
discount
rate
of
15%.
Use
the
information
in
Scenario
4.6.
What
action,
if
any,
should
the
Burdell
Labs
take?
Selected
Answer:
Correct
Select
alternative
#2.
Answers:
Do
nothing-neither
alternative
provides
a
positive
net
present
value
after
five
years.
Select
Alternative
#1.
Correct
Select
alternative
#2.
Either
alternative
may
be
selected,
since
the
positive
net
present
values
are
the
same
after
five
years.
