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Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $875,000 now and $575,000 two years from now, with annual M&O costs of $82,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $270,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 12% per year. Calculate the present worth of Option 1 and Option 2, select which option is more attractive (A) B D Option 1: $-1,548,592 Option 2: $-1,640,995 Option 1is more attractive Option 1: $-1,803,763 Option 2: $-1,825,646 Option 1is more attractive Option 1: $-1,796,705 Option 2: $-1,795,560 Option 2is more attractive Option 1: $-1,639,055 Option 2: $-1,414,411 Option 2is more attractive

Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $875,000 now and $575,000 two years from now, with annual M&O costs of $82,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $270,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 12% per year. Calculate the present worth of Option 1 and Option 2, select which option is more attractive (A) B D Option 1: $-1,548,592 Option 2: $-1,640,995 Option 1is more attractive Option 1: $-1,803,763 Option 2: $-1,825,646 Option 1is more attractive Option 1: $-1,796,705 Option 2: $-1,795,560 Option 2is more attractive Option 1: $-1,639,055 Option 2: $-1,414,411 Option 2is more attractive

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $875,000 now and $575,000 two years from now, with annual M&O costs of $82,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $270,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 12% per year. Calculate the present worth of Option 1 and Option 2, select which option is more attractive A B Option 1: $-1,548,592 Option 2: $-1,640,995 Option 1is more attractive Option 1: $-1,803,763 Option 2: $-1,825,646 Option 1is more attractive Option 1: $-1,796,705 Option 2: $-1,795,560 Option 2is more attractive Option 1: $-1,639,055 Option 2: $-1,414,411 Option 2is more attractive
Transcribed Image Text:Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $875,000 now and $575,000 two years from now, with annual M&O costs of $82,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $270,000 per year beginning now through the end of year 10. Neither option will have a significant salvage value. Use a present worth analysis to determine which option is more attractive at the company's MARR of 12% per year. Calculate the present worth of Option 1 and Option 2, select which option is more attractive A B Option 1: $-1,548,592 Option 2: $-1,640,995 Option 1is more attractive Option 1: $-1,803,763 Option 2: $-1,825,646 Option 1is more attractive Option 1: $-1,796,705 Option 2: $-1,795,560 Option 2is more attractive Option 1: $-1,639,055 Option 2: $-1,414,411 Option 2is more attractive
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