An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $38,000, an annual operating cost (AOC) of $12,000, and a service life of 2 years. Method B will cost $78,000 to buy and will have an AOC of $7,000 over its 4-year service life. Method C costs $131,000 initially with an AOC of $7,000 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 14% of its first cost.

Perform a present worth analysis to select the method at i = 10% per year.

PW of A:

PW of B:

PW of C:

Which method should we select?