Abel and Family Perfumes wants to add one or more of four new products to its current line of colognes. Historically, Abel has used a 5-year project recovery period and a MARR of 20% per year. (a) Determine which of the four options the company should undertake on the basis of a present worth analysis, provided the total amount of investment capital available is $800,000. Use a hand solution, unless assigned otherwise. (b) What products are selected if the investment limit is increased to $900,000? Use a spreadsheet, unless assigned otherwise. (All cash flows are in $1000 units.) Product Line R1 S2 T3 U4 Investment, $ −200 −400 −500 −700 M&O cost, $/year −50 −200 −300 −400 Revenue, $/year 150 450 520 770
Abel and Family Perfumes wants to add one or
more of four new products to its current line of colognes.
Historically, Abel has used a 5-year project
recovery period and a MARR of 20% per year. (a)
Determine which of the four options the company
should undertake on the basis of a present worth
analysis, provided the total amount of investment
capital available is $800,000. Use a hand solution,
unless assigned otherwise. (b) What products are
selected if the investment limit is increased to
$900,000? Use a spreadsheet, unless assigned otherwise.
(All cash flows are in $1000 units.)
Product Line R1 S2 T3 U4
Investment, $ −200 −400 −500 −700
M&O cost, $/year −50 −200 −300 −400
Revenue, $/year 150 450 520 770
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