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 8 years and MARR of 8% annual interest. Part a.) Draw the cash flow diagram for each vendor. Part b.) Calculate a PW cost for each vendor. Part c.) Indicate which vendor you would choose. Task Development Programming Operation Support Vendor M Cost, $ 200,000 150,000 42,000 20,000 40,000 30,000 Time Frame Now Years 1-4 Now Years 1-3 Years 1-8 Years 1-8 Vendor N Cost, $ 70,000 60,000 45,000 50,000 35,000 Time Frame Now Now Years 1-5 Years 1-8 Years 1-8 Vendor O Time Frame Cost, $ 150,000 Years 1-8

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 8 years and MARR of 8% annual interest. Part a.) Draw the cash flow diagram for each vendor. Part b.) Calculate a PW cost for each vendor. Part c.) Indicate which vendor you would choose. Task Development Programming Operation Support Vendor M Cost, $ 200,000 150,000 42,000 20,000 40,000 30,000 Time Frame Now Years 1-4 Now Years 1-3 Years 1-8 Years 1-8 Vendor N Cost, $ 70,000 60,000 45,000 50,000 35,000 Time Frame Now Now Years 1-5 Years 1-8 Years 1-8 Vendor O Time Frame Cost, $ 150,000 Years 1-8

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

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 8 years and MARR of 8% annual interest.
Part a.) Draw the cash flow diagram for each vendor.
Part b.) Calculate a PW cost for each vendor.
Part c.) Indicate which vendor you would choose.
Task
Development
Programming
Operation
Support
Vendor M
Cost, $
200,000
150,000
42,000
20,000
40,000
30,000
Time
Frame
Now
Years 1-4
Now
Years 1-3
Years 1-8
Years 1-8
Vendor N
Cost, $ Time Frame
70,000
60,000
45,000
50,000
35,000
Now
Now
Years 1-5
Years 1-8
Years 1-8
Vendor O
Cost, $
150,000
Time Frame
Years 1-8

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