An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%. First Cost AOC, per Year Overhaul in Year 2 Salvage Value Life Round Knife $-300,000 $-44,000 $44,000 6 years Straight Knife $-220,000 $-44,000 $-26,000 $13,000 4 years Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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18. Choose the correct answer from the given below.

 

An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight
knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%.
First Cost
AOC, per Year
Overhaul in Year 2
Salvage Value
Life
Round Knife
$-300,000
$-44,000
$44,000
6 years
Straight Knife
$-220,000
$-44,000
$-26,000
$13,000
4 years
Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.
Transcribed Image Text:An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%. First Cost AOC, per Year Overhaul in Year 2 Salvage Value Life Round Knife $-300,000 $-44,000 $44,000 6 years Straight Knife $-220,000 $-44,000 $-26,000 $13,000 4 years Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.
A
(В
Round knife: $-120,827
Straight knife: $-93,972
Select straight knife
Round knife: $-76,083
Straight knife: $-95,216
Select round knife
Round knife: $-107,179
Straight knife: $-117,381
Select round knife
Round knife: $-103,633
Straight knife: $-87,005
Select straight knife
Transcribed Image Text:A (В Round knife: $-120,827 Straight knife: $-93,972 Select straight knife Round knife: $-76,083 Straight knife: $-95,216 Select round knife Round knife: $-107,179 Straight knife: $-117,381 Select round knife Round knife: $-103,633 Straight knife: $-87,005 Select straight knife
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