1. Business
  2. Economics
  3. fastbits electronic company sdn bhd is evaluating new precision inspection...

Question: fastbits electronic company sdn bhd is evaluating new precision inspection...

Question details

FastBits Electronic Company Sdn. Bhd. is evaluating new precision inspection devices to help verify package quality. The manager has obtained the following bids from four companies. All devices have a life of five years and minimum attractive rate of return of 6%. The alternatives are mutuallv exclusive DescriptionCompany A Company B Company C Company D Initial Cost (RM)420000 Annual Costs (RM) 900 Net Cash Flows (RM) 105000 IRR 100000 12000 28000 12 .4% 570000 23000 142500 79% 200000 9000 46000 4.8% 79% Determine the annual benefits of the devices from all four companies Company A: 105900 Company B: 40000 Compan Company D: 55000 Device from which company has the highest annual benefit? D FastBits should reject the bid from which company based on the given individual IRR? D Using incremental internal rate of return analysis, from which company, if any, should the manager purchase the new precision inspection device? Use trial and error method with 6% and 12% interest rates. Understood? (Y/N) Y Step 1- Eliminate Company D Step 2-Rank Company from no 1-2-3 C-A-B Step 4 - Incremental IRR first comparison 8.1 Step 5 - Remove Company from selection A Repeat Step 4 - Incremental IRR 2nd comparison Step 5 - Choose Company Demonstrate that the same company selection would be made with proper application of the Present Worth (PW) method PW Company A 22302 PW Company B 17947 PW Company C 30267 PW Company D -6230 Thus, choose Company Format : 603700 Format: 40000 Format: 253500 Format : 66000 y C: 165500 Format:A Format:A Format:A Format: A Format X-X-X Format : 5.8 Format : A Format : 94902 Format : 52932 Format: 90698 Format: -3320 X Format : A

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution