Question
Question 2 - Consider the following: A company that manufactures magnetic membrane switches is investigating two production options. They have to select one of them.
Question 2 - Consider the following: A company that manufactures magnetic membrane switches is investigating two production options. They have to select one of them. The first option is an in-house production plan and the second is a contracted plan. Cash flow estimates are below. The interest rate is 2.412% per quarter. Use the LCM method as your analysis. (this question is an exception in that it will be scored with partial credit)
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| In-House | Contract |
| First Cost | $30,000 | $1,000 |
| Annual Income (per year) | $20,000 | $3,100 |
| Salvage value | $2,000 | none |
| Life (years) | 3 | 5 |
Question Selected Match
What is the effective annual interest rate? H. 9.65% Incorrect
Using LCM analysis, what is the present worth of the in-house option? F. $89,977 Incorrect
Using LCM analysis, the in-house option should be selected. E.$103,400 Incorrect
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