A IT manager is evaluating two proposals to reduce costs in serving customers
A IT manager is evaluating two proposals to reduce costs in serving customers. The costs are shown below with the benefits of each proposal being equal. One will be implemented in-house and the other in the "Cloud". There is no salvage value nor working capital with either proposal. The depreciation is 3-year MACRS. Both the development and implementation costs can be depreciated if the result is not a product to be sold. A five year time span is to be used to evaluate the proposals. Using a present worth criteria, which should be selected. MACRS Rates(%) 1 2 3 4 5 3-Year 33.33% 44.45% 14.81% 7.41% 5-year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% Data Block In-house Cloud Development costs $100,000 $125,000 Up front Implementation costs $25,000 $60,000 Up front Maintenance costs $4,000 $3,000 annual Storage costs $20,000 $10,000 annual Depreciation MACRS Years 3 3 years Tax Rate 25% annually MARR 15% Solution AFTER PAYMENT ENTER PASSWORD : "shiv" T...