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You are charged with choosing a vendor to produce a new software that is going to benefit your company. The project has a life cycle of 10 years and MARR of 9% annual interest.

You are charged with choosing a vendor to produce a new software that is going to benefit your company. The project has a life cycle of 10 years and MARR of 9% annual interest.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
Problem 2.2CE
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You are charged with choosing a vendor to produce a new software that is going to benefit your company. The project has a life cycle of 10 years and MARR of 9% annual interest. Part a.) Draw the cash flow diagram for each vendor. Part b.) Calculate an AW cost for each vendor. Part c.) Indicate which vendor you would choose. Task Vendor A Cost, $ Development 200,000 150,000 Programming Operation Support 55,000 20,000 40,000 30,000 Time Frame Now Years 1-4 Now Years 2-6 Years 2-10 Years 1-10 Vendor B Cost, $ 80,000 70,000 45,000 50,000 35,000 Time Frame Now Now Years 1-6 Years 2-10 Years 1-10 Vendor C Cost, $ Time Frame 160,000 Years 1-10
Transcribed Image Text:You are charged with choosing a vendor to produce a new software that is going to benefit your company. The project has a life cycle of 10 years and MARR of 9% annual interest. Part a.) Draw the cash flow diagram for each vendor. Part b.) Calculate an AW cost for each vendor. Part c.) Indicate which vendor you would choose. Task Vendor A Cost, $ Development 200,000 150,000 Programming Operation Support 55,000 20,000 40,000 30,000 Time Frame Now Years 1-4 Now Years 2-6 Years 2-10 Years 1-10 Vendor B Cost, $ 80,000 70,000 45,000 50,000 35,000 Time Frame Now Now Years 1-6 Years 2-10 Years 1-10 Vendor C Cost, $ Time Frame 160,000 Years 1-10
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