AW= Annual Worth
P = initial Cost
A/P,i,n = Capital Recovery Factor =
n = number of compounding periods
S = salvage value after 'n'
A/F,i,n = Sinking fund factor =
OC operating cost per year
METHOD A (in dollars $)
AW= 75000(A/P,10%,4) + 9000(A/F,10%,4) - 32000
= 75000*0.31547 + 9000*0.21547 - 32000
= - $6400
METHOD B( in dollars $)
AW= 140000(A/P,10%,4) + 19000(A/F,10%,4) - 24000
= 140000*0.31547 + 19000*0.21547 - 24000
= $24260
From the above Annual worth analysis it is clear that using Method B should be used which is showing a comparatively better picture of Annual worth of the asset.
2. A machine can be made by using two different methods. Method X will have a...
One of two methods must be used to produce expansion anchors. Method A costs $55,000 initially and will have a $6,000 salvage value after 3 years. The operating cost with this method will be $30,000 per year. Method B will have a first cost of $110,000, an operating cost of $6,000 per year, and a $39,000 salvage value after its 3-year life. The interest rate for both the methods is 10%. Which method should be used on the basis of...
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Required information One of two methods must be used to produce expansion anchors. Method A costs $50,000 initially and will have a $11,000 salvage value after 3 years. The operating cost with this method will be $40,000 per year. Method B will have a first cost of $125,000, an operating cost of $11,000 per year, and a $50,000 salvage value after its 3-year life. The interest rate for both the methods is 12%. Which method should be used on the...
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One of two methods must be used to produce expansion anchors. Method A costs $70,000 initially and will have a $9,000 salvage value after 3 years. The operating cost with this method will be $33,000 per year. Method B will have a first cost of $125,000, an operating cost of $9,000 per year, and a $42,000 salvage value after its 3-year life. The interest rate for both the methods is 13%.
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! Required information An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $35,000, an annual operating cost (AOC) of $6,000, and a service life of 2 years. Method B will cost $78,000 to buy and will have an AOC of $4,500 over its 4-year service life. Method C costs $115,000 initially with an AOC of $7,000 over its 8-year life. Methods A and B will have no...
Q2. Evaluate an electronic fabrication machine on the basis of the annual worth method when the MARR is 10% per year. Relevant cost data are as follows: (7 Marks) Investment cost Useful life Market (salvage) value at end of useful life Annual operating expenses Overhead cost-end of 8th year Overhead cost-end of 12th year Electronic Fabrication Machine $18,000 15 years $6,000 $450 $1000 $1500 Using Aw(i) method with short explai Please don't use excel use AW(i) factor