The projected annual sales of an LED keychain are projected to be 25,000 the first year and increase by 10,000 per year until 55,000 are sold during the fourth year. Sales are then predicted to decrease by 5,000 per year in the fifth year and each year therafter until 25,000 are sold in the tenth year.

Proposal A is to purchase manufacturing equipment costing $100,000 with an estimated salvage value of $20,000 at the end of 10 years.

Proposal B is to purchase manufacturing equipment costing $245,000 with an estimated salvage value of $50,000 at the end of 10 years. The variable manufacturing cost per unit under proposal A is estimated to be $0.80, but only $0.25 under proposal B.

1. If the interest rate is 9% what is the Present Equilavent cost of each proposal for a 10-year production period?

2. Which proposal should be accepted for a 10-year production period?