Question

Quantum Logistics. Inc., a wholesale distributor, is considering the construction of a new warehouse to serve the southeastern geographic region near the Alabama-Georgia border. There are three cities being considered. After site visits and a budget analysis, the expected income and costs associated with locating in each of the cities have been determined. The life of the warehouse is expected to be 12 years and MARR is 15 percent/year. What is the future worth of each site based on future worth ranking? Which city should be recommended?

Answer 1

Anniston City should be recommended as it has higher future value.

Step-by-step explanation:

Using the formula:

Future value of annuity = C * { [(1+r)^n - 1] / r } C where C= initial cost, r= interest rate (MARR=15%), n= 12)

- Langrange City

= $1,260,000 * { [(1+0.15)^12 - 1] / 0.15 } = $6,741,308.466

- Auburn City

$1,000,000 * { [(1+0.15)^12 - 1] / 0.15 } = $5,350,243.439

- Anniston City

$1,620,000 * { [(1+0.15)^12 - 1] / 0.15 } = $8,667,398.504