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What is the present worth of the three approaches? What is the present worth over 30 years?

What is the present worth of the three approaches? What is the present worth over 30 years?

Essentials Of Investments
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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An engineer plans to design and build a pick-and-place machine for a specialized product line. The alternatives are to contract the design to an external company and build the machine in-house or to contract the design and construction to the external company. The MARR is 9 %. In-House Design and Build Initial costs: $15,000 Labor: $3,300 per year Power: $400 per year Maintenance: $2,400 per year Taxes and Insurance: $300 per year Service Life: 10 years External Design and In-House Build Contract: $7,500 Initial costs: $12,000 at 4 months Labor: $2,300 in Year 1, $3,300 per year in following years Power: $400 per year beginning at month 5 Maintenance: $2,400 per year after Year 1 Taxes and Insurance: $340 in Year 1, $300 per year in following years Service Life: 15 years External Design and Build Contract: $25,000 Labor: $1,450 per year Power: $600 per year, beginning at month 8 Maintenance: $3,075 Taxes and Insurance: $500 per year Service Life: 15 years What is the present worth of the three approaches? What is the present worth over 30 years?
Transcribed Image Text:An engineer plans to design and build a pick-and-place machine for a specialized product line. The alternatives are to contract the design to an external company and build the machine in-house or to contract the design and construction to the external company. The MARR is 9 %. In-House Design and Build Initial costs: $15,000 Labor: $3,300 per year Power: $400 per year Maintenance: $2,400 per year Taxes and Insurance: $300 per year Service Life: 10 years External Design and In-House Build Contract: $7,500 Initial costs: $12,000 at 4 months Labor: $2,300 in Year 1, $3,300 per year in following years Power: $400 per year beginning at month 5 Maintenance: $2,400 per year after Year 1 Taxes and Insurance: $340 in Year 1, $300 per year in following years Service Life: 15 years External Design and Build Contract: $25,000 Labor: $1,450 per year Power: $600 per year, beginning at month 8 Maintenance: $3,075 Taxes and Insurance: $500 per year Service Life: 15 years What is the present worth of the three approaches? What is the present worth over 30 years?
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