Polypropylene wall caps, used for covering exterior vents for kitchen cooktops, can be made by two different methods X and Y. The estimated cash flows are shown in Table below. Which one should be selected on the basis of Annual Worth (AW) analysis at 10% per year? Method X Method Y First cost, $ - 75,000 - 140,000 Annual operating - 32,000 - 24,000 cost, $ Salvage value, $ 9,000 9,000 Life, years 4 6
Polypropylene wall caps, used for covering exterior vents for kitchen cooktops, can be made by two different methods X and Y. The estimated cash flows are shown in Table below. Which one should be selected on the basis of Annual Worth (AW) analysis at 10% per year? Method X Method Y First cost, $ - 75,000 - 140,000 Annual operating - 32,000 - 24,000 cost, $ Salvage value, $ 9,000 9,000 Life, years 4 6
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Polypropylene wall caps, used for covering exterior vents for kitchen cooktops, can be made by
two different methods X and Y. The estimated cash flows are shown in Table below. Which
one should be selected on the basis of Annual Worth (AW) analysis at 10% per year?
Method X
Method Y
First cost, $
- 75,000
- 140,000
Annual operating
- 32,000
- 24,000
cost, $
Salvage value, $
9,000
9,000
Life, years
4
10%
TABLE 15
Discrete Cash Flow: Compound Interest Factors
10%
Single Payments
Uniform Series Payments
Arithmetic Gradients
Compound
Sinking
Compound
Capital
Recovery
A/P
Present
Gradient
Gradient
Present
Worth
Amount
Worth
Fund
Amount
Present Worth
Uniform Series
F/P
P/F
A/F
F/A
P/A
P/G
A/G
n
1
1.1000
0.9091
1.00000
1.0000
1.10000
0.9091
2
1.2100
0.8264
0.47619
2.1000
0.57619
1.7355
0.8264
0.4762
3
1.3310
0.7513
0.30211
3.3100
0.40211
2.4869
2.3291
0.9366
4
1.4641
0.6830
0.21547
4.6410
0.31547
3.1699
4.3781
1.3812
1.6105
0.6209
0.16380
6.1051
0.26380
3.7908
6.8618
1.8101
1.7716
0.5645
0.12961
7.7156
0.22961
4.3553
9.6842
2.2236
7
1.9487
0.5132
0.10541
9.4872
0.20541
4.8684
12.7631
2.6216
8
2.1436
0.4665
0.08744
11.4359
0.18744
5.3349
16.0287
3.0045
5.7590
6.1446
9
2.3579
0.4241
0.07364
13.5795
0.17364
19.4215
3.3724
10
2.5937
0.3855
0.06275
15.9374
0.16275
22.8913
3.7255
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