Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $125,000 salvage value after its 3-year life. Method 2 will cost $830,000 with an AOC of $120,000, and a $240,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a 3-year planning period. You estimate the salvage value of method 2 will be 35% higher after 3 years than it is after 5 years. If the MARR is 10% per year, which method should the company select
Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $125,000 salvage value after its 3-year life. Method 2 will cost $830,000 with an AOC of $120,000, and a $240,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a 3-year planning period. You estimate the salvage value of method 2 will be 35% higher after 3 years than it is after 5 years. If the MARR is 10% per year, which method should the company select
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two methods can be used for producing solar panels
for electric power generation. Method 1 will
have an initial cost of $550,000, an AOC of
$160,000 per year, and $125,000 salvage value
after its 3-year life. Method 2 will cost $830,000
with an AOC of $120,000, and a $240,000 salvage
value after its 5-year life. Assume your boss asked
you to determine which method is better, but she
wants the analysis done over a 3-year planning period.
You estimate the salvage value of method 2
will be 35% higher after 3 years than it is after
5 years. If the MARR is 10% per year, which
method should the company select
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