3. Fulton National Hospital is reviewing ways of cutting the cost of stocking medical supplies. Two new systems are being considered to lower the and handling costs. The hospital’s holding hospital’s industrial engineer has compiled the relevant financial data for each system as given in the table below. Item Current Practice Just-in-Time Stockless ($ millions) System ($ Supply System millions) ($ millions) Start-up cost 0 3 6 Annual stock 6 1.8 0.4 holding cost Annual 3 2 1.5 operating cost System life 8 years 8 years 8 years The system life of eight years represents the period that the contract with the medical suppliers is in force. If the MARR is 10%, which system is the most economical (10 points)? hospital’s 4. Determine the payback period and the net present value for each proposal in the table below, using an interest rate of 10% per year, compounded annually. Which proposal is the best (10 points)? Cash Flows End of year Proposal A Proposal B ($) Proposal C ($) ($) 0 -75,000 -75,000 -75,000 1 25,000 20,000 0 2 25,000 25,000 0 3 25,000 30,000 0 4 25,000 35,000 130,000 Project A = payback period is $75,000/$25,000 =3 years Project B payback period is also 3 years Project C payback period is 3.57 years 5. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A
3. Fulton National Hospital is reviewing ways of cutting the cost of stocking medical supplies. Two new systems are being considered to lower the hospital’s holding and handling costs. The hospital’s industrial engineer has compiled the relevant financial data for each system as given in the table below. Item Current Practice ($ millions) Just-in-Time System ($ millions) Stockless Supply System ($ millions) Start-up cost 0 3 6 Annual stock holding cost 6 1.8 0.4 Annual operating cost 3 2 1.5 System life 8 years 8 years 8 years The system life of eight years represents the period that the contract with the medical suppliers is in force. If the hospital’s MARR is 10%, which system is the most economical (10 points)? 4. Determine the payback period and the net present value for each proposal in the table below, using an interest rate of 10% per year, compounded annually. Which proposal is the best (10 points)? End of year Cash Flows Proposal A ($) Proposal B ($) Proposal C ($) 0 -75,000 -75,000 -75,000 1 25,000 20,000 0 2 25,000 25,000 0 3 25,000 30,000 0 4 25,000 35,000 130,000 Project A = payback period is $75,000/$25,000 =3 years Project B payback period is also 3 years Project C payback period is 3.57 years 5. A large city is located close to a major seaport. It has been proposed that a new superhighway be built between the city and the seaport, running parallel to the present congested, two-lane highway. A
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