A worker in the small baby workshop makes pieces of wood for dollhouses. He earns $8.10 an hour and, with the help of a hand saw, he manages to complete the production of a whole year (1,600 pieces) in just 8 weeks of 40 hours. In other words, with a manual tool, they produce an average of 5 pieces per hour. In order to increase the productivity of this operation, the company is considering the purchase of an electric band saw and its accessories. Three models are available on the market: the A model (economic version), the B model (high-power version), and the C model (high-power luxury version). The main difference between these models is the speed. The amounts to be invested, which include the necessary accessories and other user fees, are as follows: see the excel table below. Suppose the MARR is 10%. Do the potential savings justify the purchase of one of the power tools? Also use the net present value method to determine the most economical model.

Elements Hand saw Model Model Model Model Model A B Production rate (pieces/ hour) 5 10 15 20 Hours of work required (Hours / year) 320 160 107 80 Annual labor cost ($ 8.10 / hour) 2592 1296 867 648 Annual cost of electricity ($) 400 420 480 Initial investment ($) 4000 6000 7000 Salvage value 400 600 700 Useful life year ($) 20 20 20 Elements Hand saw Model Model Model Model Model A B Production rate (pieces/ hour) 5 10 15 20 Hours of work required (Hours / year) 320 160 107 80 Annual labor cost ($ 8.10 / hour) 2592 1296 867 648 Annual cost of electricity ($) 400 420 480 Initial investment ($) 4000 6000 7000 Salvage value 400 600 700 Useful life year ($) 20 20 20