Three types of bits can be used in an automated drilling operation. A bright high-speed steel (HSS) bit is the least expensive to buy, but it has a shorter life than either gold oxide or titanium nitride bits. The HSS bits will cost $3500 to buy and will last for 3 months under the conditions of use. The operating cost for these bits will be $2000 per month. The gold oxide bits will cost $6500 to buy and will last for 6 months with an operating cost of $1500 per month. The titanium nitride bits will cost $7000 to buy and will last 6 months with an operating cost of $1200 per month. At an interest rate of 12% per year compounded monthly, which type of drill bit should be selected? Use a future worth analysis.
Three types of bits can be used in an automated drilling operation. A bright high-speed steel (HSS) bit is the least expensive to buy, but it has a shorter life than either gold oxide or titanium nitride bits. The HSS bits will cost $3500 to buy and will last for 3 months under the conditions of use. The operating cost for these bits will be $2000 per month. The gold oxide bits will cost $6500 to buy and will last for 6 months with an operating cost of $1500 per month. The titanium nitride bits will cost $7000 to buy and will last 6 months with an operating cost of $1200 per month. At an interest rate of 12% per year compounded monthly, which type of drill bit should be selected? Use a future worth analysis.
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