Question

1. Three investment alternatives (A, B, and C) are being considered. The discounted present worth (PW) for the alternatives are $35,000, $30,000, and $37,000, respectively. The three alternatives have different rankings in terms of employee morale (EM) and vendor reputation (VR). The following weights have been assigned to the three factors (PW, EM, and VR): 40, 35, and 25. On a scale from 1 to 10, the following ratings have been assigned to the three alternatives for the three factors:

Using the weighted factor comparison method, which investment alternative would be recommended?

	Ranking	Score
		CA	CRS
R	1	5	7
S	2	7	5
NPW		$60K	$40K

	A	B	C
PW	9.2	8	10
EM	9	10	8.5
VR	9.5	10	9

Answer 1

Weighted Factor Rating of Alternative A = ( Rating of PW* Weight of PW + Rating of EM* Weight of EM+ Rating of VR* Weight of VR)/(Sum of all weights) = (9.2*40+9*35+9.5*25)/(40+35+25)=(368+315+237.5)/100=920.5/100=9.205

Weighted Factor Rating of Alternative B = ( Rating of PW* Weight of PW + Rating of EM* Weight of EM+ Rating of VR* Weight of VR)/(Sum of all weights) = (8*40+10*35+10*25)/(40+35+25)=(320+350+250)/100=920/100=9.2

Weighted Factor Rating of Alternative C = ( Rating of PW* Weight of PW + Rating of EM* Weight of EM+ Rating of VR* Weight of VR)/(Sum of all weights) = (10*40+8.5*35+9*25)/(40+35+25)=(400+297.5+225)/100=922.5/100=9.225

Since alternative C has highest rating, Alternative C is recommended