1. A company is considering two alternatives for manufacturing a certain part. Method R will have a first cost of $40,000, an annual operating cost of $25,000, and a $10,000 salvage value after its five year life. Method S will have an initial cost of $100,000, an annual operating cost of $15,000, and a $12,000 salvage value after its 10 year life. At an interest rate of 12% per year, which alternative should be chosen?

2. Compare the alternatives shown below on the basis of a present-worth comparison. The interest rate is 16% per year: Alternative I Alternative II First Cost 147,000 56,000 AnnualCost 11,000 year 1: 30000 year 1 Inc $500 P/Y Inc $1,000 P/Y Salvage Value 5,000 2,000 Life, Years 6 3

3. An alternative for manufacturing a certain part has a first cost of $50,000, an annual cost of $10,000, and a salvage value of $5,000 after its 10 year life. At an interest rate of 10% per year, what is the capitalized cost of the alternative?

4. A member of congress wants to know the capitalized cost of maintaining a proposed national park. The annual maintenance cost is expected to be $25,000. At an interest rate of 6% per year, what is the capitalized cost of the maintenance?

5. A dam will have a first cost of $5,000,000, an annual maintenance cost of $25,000 and minor reconstruction costs of $100,000 every five years. At an interest of 8% per year, what is the capitalized cost of the dam?

6. Compare the alternatives shown below on the basis of their capitalized costs, using an interest rate of 15% per year. Alternative I Alternative II First Cost 160,000 25,000 Annual Operating Cost 15,000 3,000 Salvage Value 1,000,000 4,000 Life, Years infinite 7