A company that manufactures magnetic membrane switches is investigating two production options that have the estimated cash flows shown ($1 million units) in Table below. Which one should be selected on the basis of Present Worth (PW) analysis at 10% per year? First cost, $ Annual cost, $ per year Annual income, $ per year Salvage value, $ Life, years 10% n 1 2 3 4 5 6 7 8 9 10 Single Payments Compound Present Sinking Amount F/P Worth Fund P/F A/F 1.1000 1.2100 1.3310 1.4641 1.6105 1.7716 1.9487 2.1436 2.3579 2.5937 TABLE 15 Discrete Cash Flow: Compound Interest Factors Uniform Series Payments Capital Recovery A/P 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 1.00000 0.47619 0.30211 0.21547 0.16380 0.12961 0.10541 0.08744 0.07364 0.06275 Compound Amount F/A 1.0000 2.1000 3.3100 4.6410 6.1051 7.7156 9.4872 In-house Contract -30 0 -5 -2 14 2 5 11.4359 13.5795 15.9374 1.10000 0.57619 0.40211 0.31547 0.26380 0.22961 0.20541 0.18744 0.17364 0.16275 Present Worth P/A 0.9091 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 Gradient Present Worth P/G 3.1 Arithmetic Gradients 0.8264 2.3291 4.3781 6.8618 9.6842 12.7631 16.0287 19.4215 22.8913 5 10% Gradient Uniform Series A/G 0.4762 0.9366 1.3812 1.8101 2.2236 2.6216 3.0045 3.3724 3.7255
A company that manufactures magnetic membrane switches is investigating two production options that have the estimated cash flows shown ($1 million units) in Table below. Which one should be selected on the basis of Present Worth (PW) analysis at 10% per year? First cost, $ Annual cost, $ per year Annual income, $ per year Salvage value, $ Life, years 10% n 1 2 3 4 5 6 7 8 9 10 Single Payments Compound Present Sinking Amount F/P Worth Fund P/F A/F 1.1000 1.2100 1.3310 1.4641 1.6105 1.7716 1.9487 2.1436 2.3579 2.5937 TABLE 15 Discrete Cash Flow: Compound Interest Factors Uniform Series Payments Capital Recovery A/P 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 1.00000 0.47619 0.30211 0.21547 0.16380 0.12961 0.10541 0.08744 0.07364 0.06275 Compound Amount F/A 1.0000 2.1000 3.3100 4.6410 6.1051 7.7156 9.4872 In-house Contract -30 0 -5 -2 14 2 5 11.4359 13.5795 15.9374 1.10000 0.57619 0.40211 0.31547 0.26380 0.22961 0.20541 0.18744 0.17364 0.16275 Present Worth P/A 0.9091 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 Gradient Present Worth P/G 3.1 Arithmetic Gradients 0.8264 2.3291 4.3781 6.8618 9.6842 12.7631 16.0287 19.4215 22.8913 5 10% Gradient Uniform Series A/G 0.4762 0.9366 1.3812 1.8101 2.2236 2.6216 3.0045 3.3724 3.7255
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
6
Transcribed Image Text:A company that manufactures
magnetic membrane switches is
investigating two production
options that have the estimated
cash flows shown ($1 million units)
in Table below. Which one should
be selected on the basis of Present
Worth (PW) analysis at 10% per
year?
First cost, $
Annual cost, $ per year
Annual income, $ per year
Salvage value, $
Life, years
10%
n
1
2
3
4
5
6
7
8
9
10
Single Payments
Compound Present
Worth
Amount
F/P
P/F
1.1000
1.2100
1.3310
1.4641
1.6105
1.7716
1.9487
2.1436
2.3579
2.5937
TABLE 15 Discrete Cash Flow: Compound Interest Factors
Uniform Series Payments
Capital
Recovery
A/P
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3855
Sinking
Fund
A/F
1.00000
0.47619
0.30211
0.21547
0.16380
0.12961
0.10541
0.08744
0.07364
0.06275
Compound
Amount
F/A
1.0000
2.1000
3.3100
4.6410
6.1051
7.7156
9.4872
In-house Contract
-30
0
-5
-2
14
2
5
11.4359
13.5795
15.9374
1.10000
0.57619
0.40211
0.31547
0.26380
0.22961
0.20541
0.18744
0.17364
0.16275
Present
Worth
P/A
0.9091
1.7355
2.4869
3.1699
3.7908
4.3553
4.8684
5.3349
5.7590
6.1446
Gradient
Present Worth
P/G
3.1
Arithmetic Gradients
0.8264
2.3291
4.3781
6.8618
9.6842
12.7631
16.0287
19.4215
22.8913
5
10%
Gradient
Uniform Series
A/G
0.4762
0.9366
1.3812
1.8101
2.2236
2.6216
3.0045
3.3724
3.7255
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