One of two methods must be used to produce expansion anchors. Method A costs $45,000initially and will
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One of two methods must be used to produce expansion anchors. Method A costs $45,000initially and will have a $7,000 salvage value after 3 years. The operating cost with thismethod will be $21,000 per year. Method B will have a first cost of $95,000, an operatingcost of $7,000 per year, and a $31,000 salvage value after its 3-year life. The interest rate for both the methods is 11%.
Which method should be used on the basis of a present worth analysis?
The present worth of method A is$and that of method B is$.
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