City Colleges of Chicago (CCC) Department of Culinary Arts is looking to uperae

Question

City Colleges of Chicago (CCC) Department of Culinary Arts is looking to uperae different vendors kitchen equipment which is used to train students in the Culinary Arts. were selected as finalists. The financial proposal of each vendor is shown like to perform an economic analysis for 12 years and a MARR of 7%. Use ROR a vendor. Three different vendors in the table. CCC would analysis to decide on First Cost,$ OperatingIncome,S/yr $5,000 $4,000 Vendor C $61,000 $3,000 $8,000 cost, $/yr Vendor A $%40,000 $2,000 Vendor B $35,000 $1000

Explanation / Answer

Five Forms of Cash Flow equation are:

PW of benefits-PW of costs=0

PW of Benefits/PW of Costs=1

Net Present Worth=0

EUAB-EUAC=0

PW of costs=PW of benefits

These 5 equations represent the same concept in different forms.They can relate costs and benefits with the rate of return i as the only unknown.

For ROR analysis 12-year analysis period is necessary

Vendor A

NPW(12) = -$40000-$2000(P/A,7%,12)+$5000(P/F,7%,12)= -16172.2$

Vendor B

NPW(12) = -$35000-$1000(P/A,7%,12)+$4000(P/F,7%,12)= -11172.2$

Vendor C

NPW(12) = -$61000-$3000(P/A,7%,12)+$8000(P/F,7%,12)= -21287$

Vendor B is preferable to be selected.

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