A software package created by Navarro & Associates can be used for analyzing and designing three-sided guyed towers and three- and four-sided self-support­ing towers. A single-user license will cost $4000 per year. A site license has a one-time cost of $15,000. A structural engineering consulting company is try­ing to decide between two alternatives: first, to buy one single-user license now and one each year for the next 4 years (which will provide 5 years of service), or second, to buy a site license now. Determine which strategy should be adopted at an interest rate of 12% per year for a 5-year planning period using present worth evaluation.

Question

What will be an ideal response?

Answer 1

PWsingle = -4000 - 4000(P/A,12%,4)
= -4000 - 4000(3.0373)
= $-16,149


PWsite = $-15,000

Buy the site license