Use payback analysis to select more economical alternative

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A window frame manufacturer is searching for ways to improve revenue from its triple-insulated sliding windows. Alternative A is an increase in TV and radio marketing, A total of $600,000 spent now is expected to increase revenue by $100,000 per year. Alternative B requires the same amount for enhancements to the in-plant manufacturing process that will improve the product. New revenues start slowly for this alternative at an estimated $15,000 per year, with a growth of 20% per year as the improved product gains reputation among builders. The MARR is 6%, and maximum projection periods are 8 years for A and 16 years for B. Use payback analysis to select the more economical alternative.

Reference no: EM132169569

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