The data for new and used machines are shown below: Initial cost($) Annual operating cost ($/year) Salvage value ($) Used machine 15,000 8,000 5,000 New machine 3 40,000 2,000 10,000 Life (years) Use an interest rate of 10% per year. Find 1. The present worth of the new machine? 2. To compare the machines on the basis of a present worth analysis, calculate the present worth values of both machines 6
The data for new and used machines are shown below: Initial cost($) Annual operating cost ($/year) Salvage value ($) Used machine 15,000 8,000 5,000 New machine 3 40,000 2,000 10,000 Life (years) Use an interest rate of 10% per year. Find 1. The present worth of the new machine? 2. To compare the machines on the basis of a present worth analysis, calculate the present worth values of both machines 6
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Question 1:
The data for new and used machines are shown below:
Used machine
Question 2:
Initial cost($)
Annual operating cost ($/year)
Salvage value ($)
Life (years)
Use an interest rate of 10% per year. Find
1. The present worth of the new machine?
2. To compare the machines on the basis of a present worth analysis, calculate the present worth values
of both machines
15,000
8,000
5,000
New machine
3
40,000
2,000
10,000
6
1. A company is considering two alternatives for manufacturing a certain part. Method R will have a first
cost of $40,000, an annual operating cost of $25,000, and a $10,000 salvage value after its five year life.
Method S will have an initial cost of $100,000, an annual operating cost of $15,000, and a $12,000
salvage value after its 10 year life. At an interest rate of 12% per year, find the present worth values of
the two alternatives
2. For the alternatives calculate their annual worth values](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F64e22897-7393-441c-a03b-d6c25465272e%2F53896b7c-d630-4f4f-b860-8d0fd8164417%2Fm4jg5nb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 1:
The data for new and used machines are shown below:
Used machine
Question 2:
Initial cost($)
Annual operating cost ($/year)
Salvage value ($)
Life (years)
Use an interest rate of 10% per year. Find
1. The present worth of the new machine?
2. To compare the machines on the basis of a present worth analysis, calculate the present worth values
of both machines
15,000
8,000
5,000
New machine
3
40,000
2,000
10,000
6
1. A company is considering two alternatives for manufacturing a certain part. Method R will have a first
cost of $40,000, an annual operating cost of $25,000, and a $10,000 salvage value after its five year life.
Method S will have an initial cost of $100,000, an annual operating cost of $15,000, and a $12,000
salvage value after its 10 year life. At an interest rate of 12% per year, find the present worth values of
the two alternatives
2. For the alternatives calculate their annual worth values
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