For some years, the City of Armstrong Power Au­thority has used 4-20 mA technology to measure parameters such as pressure, temperature, flow rates, and speed of various machinery and systems installed in its generation facilities. It now plans to use the same technology to measure vibration on all of its rotating machinery with the goal of evalu­ating continuously the health of the equipment, to include friction buildup, breakdown prediction, and preventive maintenance needs. Depending upon the vendors chosen, the useful lives and an­ticipated annual net savings will vary, as reflected in the estimates shown.

Question

Use repeated spreadsheet solutions of the capital budgeting problem with investment limits ranging from $0.5 million to $2.5 million (in $0.25 million increments, i.e., $250 increments since all esti­mated values are in $1000 units) to determine the best selections. Once done, develop a graph that plots the investment limit versus the value of Z. Use MARR = 5% per year.

Answer 1

Build a spreadsheet and use Solver repeatedly at increasing values of b to find the vendor combinations that maximize the value of Z; then develop a scatter graph.