1. The Great Business Inc. has a single Gateway server for its e-business which has an availability of 96%. The business loss due to this system downtime is estimated at $200 per hour. The IT organization has a proposal to add a 2nd Gateway to reduce downtime by 50%. The new system cost $40000 to buy and install and $5000 per year annual maintenance contract. Assume a 5 year planning horizon with no salvage value for the system. At an interest rate of 12% is this a good investment? (Hint: draw the cash flow diagram and calculate the present worth of the project.)2. For the previous case the current Gateway vendor has an offer to upgrade the existing system to 97% availability for a onetime cost of $65000. Is this a good option?3. The SBM Corporation is planning to build a high speed wireless LAN for its corporate site. The specifics are below.
Capital Cost: $2000000
Yearly Savings: $500000
Salvage Val.: $50000
Service Life: 10 years
Interest Rate 10%
a) What is the PW of this investment?
b) What is the annual worth of this investment?
c) Is this a good investment?