Question

Two methods can be used to produce expansion anchors. Method A costs $80,000 initially and will have a $17,000 salvage value after 3 years. The operating cost with this method will be $38,000 in year 1, increasing by $3600 each year. Method B will have a first cost of $118,000, an operating cost of $6000 in year 1, increasing by $6000 each year, and a $48,000 salvage value after its 3-year life. At an interest rate of 10% per year, which method should be used on the basis of a present worth analysis? The present worth for method A is $ . The present worth for method B is $ . what method is used to produce expansion anchors

Answer 1