Cost component Alpha Beta Charlie development 100,000 immediately 150,000 year 1 10,000 immediately None Programming 45,000 immediately 35,000 year 1 45,000 immediately 30,000 year 1 None Operations 50,000 1-10 80,000 years 1-10 150,000 years 1-10 support 30,000 1-10 40,000 years 1-10 none   If each system is expected to have a 10-year life, 1. calculate the net present value for each system if the cost of capital is 8%.  2. Specify which system should be selected and why

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Cost component

Alpha

Beta

Charlie

development

100,000 immediately

150,000 year 1

10,000 immediately

None

Programming

45,000 immediately

35,000 year 1

45,000 immediately

30,000 year 1

None

Operations

50,000 1-10

80,000 years 1-10

150,000 years 1-10

support

30,000 1-10

40,000 years 1-10

none

 

If each system is expected to have a 10-year life,

1. calculate the net present value for each system if the cost of capital is 8%. 

2. Specify which system should be selected and why

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