Economic analysis of alternatives for PC upgrade of OR Department laboratory

Abstract

The Operations Research Department at the NPS plans to upgrade the hardware of the Personal Computer (PC) laboratory. The objective of the thesis is to analyze the potential upgrade paths dependent upon hardware availability, software compatibility, maintenance and initial cost. The alternatives are: (a) to upgrade the existing Zenith with a 80386 (CPU), (b) to buy the UNISYS desktop III system, or (c) to purchase the DELL SYSTEM-310. The study utilizes the economic cost/benefit view to examine the alternatives and to develop recommendations. The principles of economic analysis are reviewed. The results of survey of user's opinion are analyzed to establish the requirements for upgrade. The result of economic analysis shows the UNISYS system to be the least expensive and most system-effective. The price of each unit is an undiscounted 2,176. dollars or discounted 1,994 dollars for five years of economic life and is within the budget available. The sensitivity analysis reveals (a) by break-even analysis, the economic life parameter is insensitive, (b) the cost reduction parameter is also insensitive, and (c) the discount rate is also insensitive. Therefore the recommendations is that the UNISYS system be chosen.