An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%. First Cost AOC, per Year Overhaul in Year 2 Salvage Value Life Round Knife $-300,000 $-44,000 $44,000 6 years Straight Knife $-220,000 $-44,000 $-26,000 $13,000 4 years Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.

An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%. First Cost AOC, per Year Overhaul in Year 2 Salvage Value Life Round Knife $-300,000 $-44,000 $44,000 6 years Straight Knife $-220,000 $-44,000 $-26,000 $13,000 4 years Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

18. Choose the correct answer from the given below.

An international textile company's North America Division must decide which type of fabric cutting machines it will use-a straight
knife or a round knife. The estimates are summarized below. Compare them on the basis of annual worths at i = 10%.
First Cost
AOC, per Year
Overhaul in Year 2
Salvage Value
Life
Round Knife
$-300,000
$-44,000
$44,000
6 years
Straight Knife
$-220,000
$-44,000
$-26,000
$13,000
4 years
Calculate the Annual Worth of each type of fabric cutting machine and select which type should be selected.

A
(В
Round knife: $-120,827
Straight knife: $-93,972
Select straight knife
Round knife: $-76,083
Straight knife: $-95,216
Select round knife
Round knife: $-107,179
Straight knife: $-117,381
Select round knife
Round knife: $-103,633
Straight knife: $-87,005
Select straight knife

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