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Question : A distribution center wants to evaluate an alternative product tracking system : 2141826

**SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.**

**Answer the question.**

7) A distribution center wants to evaluate an alternative product tracking system. The system has an initial cost of $500,000 and a salvage value of $80,000 at the end of its useful life of 7 years. The operating cost is estimated to be $550 per metric ton of product moved per day. The center can handle between 30 and 50 tons per day. Analyze the sensitivity of the PW to changes in a 10-metric-ton increment of product moved. Use an interest rate of 3% per year and 200 days of work per year.

8) Wolfpack, Inc., a textile manufacturing company, is considering opening a production and shipping facility to keep up with demand for its pillows. The facility is expected to require an initial investment of $190,000 and will have a $36,000 salvage value after 5 years. Net annual revenue is estimated to be $100,000. Determine how sensitive the decision to invest in the new facility is to the estimates of initial cost and net annual revenue. Use a MARR of 4% per year and a 5-year study period.

9) The estimated cash flows of an investment project are shown below.

Item |
Optimistic |
Most likely |
Pessimistic |

Initial investment, $ |
745,000 |
750,000 |
755,000 |

Net annual revenue, $/year |
81,500 |
80,000 |
79,500 |

Market value, $ |
39,500 |
38,000 |
37,000 |

Project life, years |
7 |
7 |
7 |

Using a MARR of 14% per year, determine the AW for each of the three estimation conditions.

10) Ginger has agreed to a lawsuit settlement of $600,000 with a certain pharmaceutical company. The company has offered options to pay her the awarded money. After discussing the terms with the company, she expects that the company should be able to pay her back within 3-5 years. Ginger has developed the following estimates. Which option should she select, if her personal MARR is 13% per year?

Option |
Delay period |
Cash Flow Estimates, $ |

A |
- |
$600,000 now |

B - Pessimistic |
5 years |
$131,000 per year for every year the payment is delayed. |

C - Most likely |
4 years |
$161,200 per year for every year the payment is delayed. |

D - Optimistic |
3 years |
$211,500 per year for every year the payment is delayed. |