Suppose you are in charge of the procurement for installation of a heating system for a factory building. Option A is quoted as an economic product with an initial price tag of 78,000 $. On the other hand Option B is a more efficient product with a higher price tag of 95,000 $. It is also estimated that the operating of Option B will be roughly 300 $ less per month on average. The company quoting these products claim that the price difference will be paid off in 5 years. Do your own NPV or ROI analysis and see if this claim is true or not. Hint: take annual inflation rate as 12% on average.
Suppose you are in charge of the procurement for installation of a heating system for a factory building. Option A is quoted as an economic product with an initial price tag of 78,000 $. On the other hand Option B is a more efficient product with a higher price tag of 95,000 $. It is also estimated that the operating of Option B will be roughly 300 $ less per month on average. The company quoting these products claim that the price difference will be paid off in 5 years. Do your own NPV or ROI analysis and see if this claim is true or not. Hint: take annual inflation rate as 12% on average.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose you are in charge of the procurement for installation of a heating system for a
factory building. Option A is quoted as an economic product with an initial price tag of
78,000 $. On the other hand Option B is a more efficient product with a higher price tag
of 95,000 Ș. It is also estimated that the operating of Option B will be roughly 300 $ less
per month on average. The company quoting these products claim that the price
difference will be paid off in 5 years. Do your own NPV or ROI analysis and see if this
claim is true or not.
Hint: take annual inflation rate as 12% on average.
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