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smarty5187
smarty5187
16.04.2020 • 
Business

G Geek Inc. has decided to acquire a new Web Server. It has three options. IBM: purchase cost of $340,451 and operating costs of $29,631 in year 1, $22,219 in year 2, and $28,243 in year 3 (paid at the end of each year). Cisco: purchase cost of $229,772 and operating costs of $39,399 in year 1, $36,621 in year 2, and $35,544 in year 3 (paid at the end of each year). Sun: purchase cost of $272,342 and operating costs of $23,381 in year 1, $24,205 in year 2, and $20,000 in year 3 (paid at the end of each year). Assume that Geek Inc. has a budget of $318,028 for this investment and all web servers have a service life of 3 years. Based on the defender-challenger approach and given that the MARR is 8%, reinvestment rate is 6%, and minimum external rate of return is 6%, compute the incremental Benefit-Cost ratio of choosing the best web server (in economic terms) and then indicate your recommendation as follows: - answer "0" (without the commas) if your recommendation is the IBM server; - answer "1" (without the commas) if your recommendation is the Cisco server; - write down as your answer the value of the incremental B-C ratio if your recommendation is the Sun server. Note: round your answer to two decimal places, and do not include spaces, currency signs, plus or minus signs, nor commas.

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