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Practical Management Science

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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The Ford Motor Company is considering three mutually exclusive electronic stability control systems for protection against rollover of its automobiles. The investment period is four years (equal lives), and the MARR is 12% per year. Data for fixturing costs of the systems are given below. Which alternative should the company select?

| Alternative | IRR | Capital Investment | Annual Receipts Less Expenses | Salvage Value |
|-------------|------|--------------------|--------------------------------|---------------|
| A | 16.6%| $12,000 | $3,750 | $3,000 |
| B | 16.7%| $15,800 | $5,000 | $3,700 |
| C | 19.0%| $8,000 | $2,750 | $1,500 |

This table presents data on three alternatives (A, B, and C) for electronic stability control systems including each alternative's Internal Rate of Return (IRR), capital investment cost, annual receipts less expenses, and salvage value.

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