thods. Method A will have a first cost of RM 40,000, an annual operating cost of 00, and a service life of 2 years. Method B will cost RM 80,000 to buy and will ha nual operating cost of RM 6,000 over its 4-year service life. Method C will cost 130,000 initially with an annual operating cost of RM 4,000 over its 8-year life. ethods A and B will have no salvage value, but method C will have some equipme

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Subject : Economy and Engineering Management

An electric switch manufacturing company has to choose one of three different assembly
methods. Method A will have a first cost of RM 40,000, an annual operating cost of RM
9,000, and a service life of 2 years. Method B will cost RM 80,000 to buy and will have an
annual operating cost of RM 6,000 over its 4-year service life. Method C will cost
RM130,000 initially with an annual operating cost of RM 4,000 over its 8-year life.
Methods A and B will have no salvage value, but method C will have some equipment
worth an estimated RM 12,000. At an interest rate of 10% per year, select the best method
on the basis of a present worth analysis.
Transcribed Image Text:An electric switch manufacturing company has to choose one of three different assembly methods. Method A will have a first cost of RM 40,000, an annual operating cost of RM 9,000, and a service life of 2 years. Method B will cost RM 80,000 to buy and will have an annual operating cost of RM 6,000 over its 4-year service life. Method C will cost RM130,000 initially with an annual operating cost of RM 4,000 over its 8-year life. Methods A and B will have no salvage value, but method C will have some equipment worth an estimated RM 12,000. At an interest rate of 10% per year, select the best method on the basis of a present worth analysis.
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