Question
A manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $40,000, an annual operating cost
A manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $40,000, an annual operating cost (AOC) of $9000, and a service life of 2 years. Method B will cost $80,000 to buy and will have an AOC of $6000 over its 4-year service life. Method C costs $130,000 initially with an AOC of $4000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 10% of its first cost. Perform both (a) future worth, and (b) present worth analyses to select the method of choice at i = 10% per year.
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