Leonard, a company that manufactures explosion-proof motors, is considering two alternatives for expanding its international export capacity. Option 1 requires equipment purchases of $930,000 now and $425,000 two years from now, with annual M&O costs of $66,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $220,000 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. The present worth of option 1 is $ and that of option 2 is $ Option (Click to select) ♥ is 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 $930,000 now and $425,000 two years from now, with annual M&O costs of $66,000 in years 1 through 10. Option 2 involves subcontracting some of the production at costs of $220,000 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. The present worth of option 1 is $ and that of option 2 is $ Option (Click to select) ♥ is more attractive.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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