Process A Process B Investment $22,000 $15,000 Operation and $15,000/year $13,000/year maintenance costs Material and direct $0.15/golf tee $0.20/golf tee labor costs Salvage value $2,000 $2,000 Useful life 10 years 8 years
Process A Process B Investment $22,000 $15,000 Operation and $15,000/year $13,000/year maintenance costs Material and direct $0.15/golf tee $0.20/golf tee labor costs Salvage value $2,000 $2,000 Useful life 10 years 8 years
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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Question
A firm has decided to manufacture biodegradable golf tees. These are two production processes available for consideration. Pertinent data for each process are as follows: Assuming material and direct labor costs are the only
variable costs and the MARR = 15% per year, over what range of annual production volume is Process A preferred? Assume repeatability.
Transcribed Image Text:Process A
Process B
Investment
$22,000
$15,000
Operation and
$15,000/year $13,000/year
maintenance costs
Material and direct
$0.15/golf tee $0.20/golf tee
labor costs
Salvage value
$2,000
$2,000
Useful life
10 years
8 years
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