Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $120,000 salvage value after its 3-year life. Method 2 will cost $830.000 with an AOC of $120,000, and a $240,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a 3- year planning period. You estimate the salvage value of method 2 will be 25% higher after 3 years than it is after 5 years. If the MARR is 10% per year, which method should the company select? C O Select Method 1= -343,398 O Select Method2= -334, 398 Select Method 1=-344,909 O Select Method 2=-366,868

Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $120,000 salvage value after its 3-year life. Method 2 will cost $830.000 with an AOC of $120,000, and a $240,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a 3- year planning period. You estimate the salvage value of method 2 will be 25% higher after 3 years than it is after 5 years. If the MARR is 10% per year, which method should the company select? C O Select Method 1= -343,398 O Select Method2= -334, 398 Select Method 1=-344,909 O Select Method 2=-366,868

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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