You are charged with choosing a vendor to produce a new software that is going to benetit 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. Vendor M Cost, $ Vendor O Time Frame Task Vendor N Time Cost, $ Time Frame Cost, $ Frame Development 200,000 150,000 42,000 20,000 40,000 30,000 Now 70,000 Now Years 1-4 60,000 45,000 50,000 35,000 Programming Now Now Years 1-3 Years 1-5 Years 1-8 Years 1-8 150,000 Years 1-8 Operation Support Years 1-8 Years 1-8
You are charged with choosing a vendor to produce a new software that is going to benetit 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. Vendor M Cost, $ Vendor O Time Frame Task Vendor N Time Cost, $ Time Frame Cost, $ Frame Development 200,000 150,000 42,000 20,000 40,000 30,000 Now 70,000 Now Years 1-4 60,000 45,000 50,000 35,000 Programming Now Now Years 1-3 Years 1-5 Years 1-8 Years 1-8 150,000 Years 1-8 Operation Support Years 1-8 Years 1-8
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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This is the problem. I need to do cash flow diagram , PW cost for each vendor, and which vendor would choose.
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 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.
Vendor N
Time Frame
Vendor O
Time Frame
Task
Vendor M
Cost, $
Time
Frame
Cost, $
Cost, $
Now
200,000
150,000
42,000
20,000
40,000
30,000
Development
Now
70,000
Years 1-4
60,000
45,000
50,000
35,000
Programming
Now
Now
Years 1-3
Years 1-5
Years 1-8
Years 1-8
150,000
Years 1-8
Operation
Support
Years 1-8
Years 1-8
Expert Solution
Step 1 Concept-
a.) Cash flow diagram is a diagram which shows various cash flows over a period of time on a time line.
b.) Present Worth of cost refers to the Total Present value of various costs to be incurred over a period of time.
c) That vendor should be selected which would incur least cost.
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