A company that manufactures magnetic membrane switches is investigating two production options that have the estimated cash flows shown ($1 million units). Which one should be selected on the basis of a present worth analysis at 10% per year?

	In-house	Contract
First cost, $	-20	0
Annual cost, $ per year	-4	-1
Annual income, $ per year	10	3.1
Salvage value, $	3	-
Life, years	5	5

Answer:

Pw _{In-house = $ (Write it with the Millions units)}

Pw _{Contract = $ (Write it with the Millions units)}

So, the best alternative is: