! Required information An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $35000, an annual operating cost (AOC) of $7000, and a service life of 2 years. Method B will cost $76000 to buy and will have an AOC of $9000 over its 4-year service life. Method C costs $137000 initially with an AOC of $6500 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 13.00% of its first cost. Perform a future worth analysis to select the method at /= 10.00% per year. (Include a minus sign if necessary.) The future worth of method A is $-50820 The future worth of method B is $ -153105 The future worth of method C is $ -321916.8 Method A is selected.
! Required information An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $35000, an annual operating cost (AOC) of $7000, and a service life of 2 years. Method B will cost $76000 to buy and will have an AOC of $9000 over its 4-year service life. Method C costs $137000 initially with an AOC of $6500 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 13.00% of its first cost. Perform a future worth analysis to select the method at /= 10.00% per year. (Include a minus sign if necessary.) The future worth of method A is $-50820 The future worth of method B is $ -153105 The future worth of method C is $ -321916.8 Method A is selected.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Required information
An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has
an estimated first cost of $35000, an annual operating cost (AOC) of $7000, and a service life of 2 years. Method B will
cost $76000 to buy and will have an AOC of $9000 over its 4-year service life. Method C costs $137000 initially with an
AOC of $6500 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth
13.00% of its first cost.
Perform a future worth analysis to select the method at /= 10.00% per year. (Include a minus sign if necessary.)
The future worth of method A is $-50820
The future worth of method B is $ -153105
The future worth of method C is $ -321916.8
Method A
is selected.
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