# You are the PM on a project, and you need to decide which vendor to choose as a supplier for one of the components of a product. Vendor A has offered the component to you at \$50,000 up front with a recurring cost of \$5,000 per year. Vendor B would charge you \$70,000 as the initial fee then a \$2,000 cost per year. What is the point in years which the costs will be equal? (3 points)         If the project is supposed to last 5 years, which vendor should you choose? (3 points)

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1. You are the PM on a project, and you need to decide which vendor to choose as a supplier for one of the components of a product. Vendor A has offered the component to you at \$50,000 up front with a recurring cost of \$5,000 per year. Vendor B would charge you \$70,000 as the initial fee then a \$2,000 cost per year.

1. What is the point in years which the costs will be equal? (3 points)

1. If the project is supposed to last 5 years, which vendor should you choose? (3 points)

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Step 1

Here,

For vendor A:

Initial cost= \$50,000

Annual cost= \$5,000

For vendor B:

Initial cost= \$70,000

Annual cost= \$2,000

Step 2

A) Calculate incremental initial cost, (Ci) and incremental annual cost, (CA).

Step 3

Equally time is calculate by the ratio of...

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