1) A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 2, 6, and 3 respectively. MARR is 0.08 per year. D01 D02 OS FIRST COST, $ 138,000 962,000 АОС, $ SV, $ 113,000 70,000 138,000 36,000 352,000 a) Draw the cash flow for all of alternatives. b) Which alternative will be selected on the basis of PW calculation? Why? c) If OS increases 20% each year, which alternative will be more economical (PW method)? d) Which alternative will be selected if AW method is used?

1) A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 2, 6, and 3 respectively. MARR is 0.08 per year. D01 D02 OS FIRST COST, $ 138,000 962,000 АОС, $ SV, $ 113,000 70,000 138,000 36,000 352,000 a) Draw the cash flow for all of alternatives. b) Which alternative will be selected on the basis of PW calculation? Why? c) If OS increases 20% each year, which alternative will be more economical (PW method)? d) Which alternative will be selected if AW method is used?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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