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Two methods can be used to produce expansion anchors. Method A costs $60,000initially and will have a $13,000 salvage value after 3 years.
Two methods can be used to produce expansion anchors. Method A costs $60,000 initially and will have a $13,000 salvage value after 3 years. The operating cost with this method will be $34,000 in year 1, increasing by $2800 each year. Method B will have a first cost of $114,000, an operating cost of $8000 in year 1, increasing by $8000 each year, and a $44,000 salvage value after its 3-year life. At an interest rate of 14% per year, which method should be used on the basis of a present worth analysis?
The present worth for method A is $
The present worth for method B is $
