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Can you please do it throught Excel and the explanation. Thank you Problem 5.11 Leonard, a company that manufactures explosionproof motors, is considering two alternatives
Can you please do it throught Excel and the explanation. Thank you
Problem 5.11 Leonard, a company that manufactures explosionproof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $900,000 now and $560,000 two years from now, with annual M&O costs of $79,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $280,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 20% per year. (Note: Check out the spreadsheet exercises for new options that Leonard has been offered recently.) (a) What is the present worth of Option 1? (b) What is the present worth of Option 2? (c) Would you recommend 1 or 2? Problem 5.15 Two methods can be used to produce expansion anchors. Method A costs $80,000 initially and will have a $15,000 salvage value after 3 years. The operating cost with this method will be $30,000 in year 1, increasing by $4000 each year. Method B will have a first cost of $120,000, an operating cost of $8000 in year 1, increasing by $6500 each year, and a $40,000 salvage value after its 3-year life. At an interest rate of 12% per year, which method should be used on the basis of a present worth analysis? (a) What is the present worth of Method A? (b) What is the present worth of Method B? (c) Would you select Method A or BStep by Step Solution
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