1. Thepurchasingagentofalargegeotechnicaltestingfirmistryingtodecidewhether to buy high carbon steel or carbide-tipped drilling tools for the drills used in the field to get soil samples. The carbide tools cost $2,000 and have an estimated life of 3 years. The steel tools cost $1,400 but only last 2 years. If the company's minimum attractive rate of return is 20%, which alternative is the best? Salvage values are zero.
2. a) Use the annual equivalent method b) Use the present worth method
3. c) Use the rate of return method