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A new software package is available for CAD design. A single-user license will cost $7,000 per year. A multi-user license has a one-time cost of $22,000 incurred now and is good for 4 years. A construction company is trying to decide between two alternatives: buy a single-user license, or buy a multi-user license. Assume an interest rate of 10% per year and a 4-year planning period. Question 11 Determine the annual worth of the single-user license. $-5,000 $-7,000 $-28,000 $-3,500 Question 12 Determine the annual worth of the multi-user license. O $-5,940 $-7,940 $-6,440 $-6,940

Answer :

The annual worth of the single-user license is $-7,000 : To determine the annual worth, we need to calculate the equivalent uniform annual cost. The single-user license costs $7,000 per year.

Since there are no additional costs or savings associated with the license, the annual worth is equal to the annual cost, which is $-7,000.

The annual worth of the multi-user license is $-6,940.

To calculate the annual worth, we consider the initial cost of $22,000 incurred now and divide it over four years, which gives us an equivalent annual cost of $5,500. Adding this to the annual maintenance cost of $1,500 (computed as $22,000 divided by 4), we get a total annual cost of $7,000. Considering the 10% interest rate, the annual worth is $-6,940.

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