A manufacturing company is proposing two new methods to enhance and increase the production line of the company. Method A is expected to cost $1000 while method B is expected to cost $2400. The maintenance cost of the production line will increase to $800 per year if method A is applied and $650 per year with method B, which one of the two proposed methods is more economical based on a future worth analysis at an interest rate of 10% per year? Assume a 15-year life for the production line.
A manufacturing company is proposing two new methods to enhance and increase the production line of the company. Method A is expected to cost $1000 while method B is expected to cost $2400. The maintenance cost of the production line will increase to $800 per year if method A is applied and $650 per year with method B, which one of the two proposed methods is more economical based on a future worth analysis at an interest rate of 10% per year? Assume a 15-year life for the production line.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A manufacturing company is proposing two new methods to enhance and increase the
production line of the company. Method A is expected to cost $1000 while method B is
expected to cost $2400. The maintenance cost of the production line will increase to $800
per year if method A is applied and $650 per year with method B, which one of the two
proposed methods is more economical based on a future worth analysis at an interest rate
of 10% per year? Assume a 15-year life for the production line.
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