An industrial engineer is considering two robots for purchase by a fiber-optic manufacturing company. Robot X will

Question:

An industrial engineer is considering two robots for purchase by a fiber-optic manufacturing company. Robot X will have a first cost of $80,000, an annual maintenance and operation (M&O) cost of $30,000, and a $40,000 salvage value. Robot Y will have a first cost of $97,000, an annual M&O cost of $27,000, and a $50,000 salvage value. Which should be selected on the basis of a future worth comparison at an interest rate of 15% per year? Use a 3-year study period.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...