Three different plans were presented to the Ahbhalet Corporation for operating an identity-theft scanning system. Plan A involves enewable 1-year contracts with payments of $1.1 million at the beginning of each year. Plan B is a 2-year contract that requires four Dayments of $360,000 each, with the first one made now and the other three at 6-month intervals. Plan C is a 3-year contract that entails payment of $3.5 million now and the second payment of $0.5 million 2 years from now. Assuming that the company could enew any of the plans under the same payment conditions, determine which plan is best on the basis of a PW analysis at a MARR of 5% per year compounded semiannually. The present worth of plan A is $ The best plan on the basis of the present worth analysis is plan B the present worth of plan B is $ and the present worth of plan C is $

Three different plans were presented to the Ahbhalet Corporation for operating an identity-theft scanning system. Plan A involves enewable 1-year contracts with payments of $1.1 million at the beginning of each year. Plan B is a 2-year contract that requires four Dayments of $360,000 each, with the first one made now and the other three at 6-month intervals. Plan C is a 3-year contract that entails payment of $3.5 million now and the second payment of $0.5 million 2 years from now. Assuming that the company could enew any of the plans under the same payment conditions, determine which plan is best on the basis of a PW analysis at a MARR of 5% per year compounded semiannually. The present worth of plan A is $ The best plan on the basis of the present worth analysis is plan B the present worth of plan B is $ and the present worth of plan C is $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Three different plans were presented to the Ahbhalet Corporation for operating an identity-theft scanning system. Plan A involves
renewable 1-year contracts with payments of $1.1 million at the beginning of each year. Plan B is a 2-year contract that requires four
payments of $360,000 each, with the first one made now and the other three at 6-month intervals. Plan C is a 3-year contract that
entails payment of $3.5 million now and the second payment of $0.5 million 2 years from now. Assuming that the company could
renew any of the plans under the same payment conditions, determine which plan is best on the basis of a PW analysis at a MARR of
6% per year compounded semiannually.
The present worth of plan A is $
The best plan on the basis of the present worth analysis is plan B
the present worth of plan B is $
and the present worth of plan C is $

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Step 1: Define cash flow and present worth

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Step 2: Calculate the present worth for plan A

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Step 3: Calculate the present worth for plan B

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Step 4: Calculate the present worth for plan C

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Step 5: Compare the present worth values

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