Perform a future worth analysis to select the method at i = 10% per year.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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An electric switch manufacturing company is trying to
decide between three different assembly methods.
Method A has an estimated first cost of $35,000, an
annual operating cost (AOC) of $6,000, and a service
life of 2 years. Method B will cost $78,000 to buy
and will have an AOC of $4,500 over its 4-year service
life. Method C costs $115,000 initially with an AOC of
$7,000 over its 8-year life. Methods A and B will have
no salvage value, but Method C will have equipment
worth 14% of its first cost.
Perform a future worth analysis to select the method at i = 10% per year.
The future worth of method A is $-360660.73
The future worth of method B is $ -445930.90
The future worth of method C is $-404576.75
Method A
is selected.
Transcribed Image Text:! Required information An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $35,000, an annual operating cost (AOC) of $6,000, and a service life of 2 years. Method B will cost $78,000 to buy and will have an AOC of $4,500 over its 4-year service life. Method C costs $115,000 initially with an AOC of $7,000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 14% of its first cost. Perform a future worth analysis to select the method at i = 10% per year. The future worth of method A is $-360660.73 The future worth of method B is $ -445930.90 The future worth of method C is $-404576.75 Method A is selected.
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