Homework Help is Here – Start Your Trial Now!
Business
Accounting
Which method should it select on the basis of a present worth analysis? (Include a minus sign if necessary.) The present worth of method 1 is $ -3,374.10 and that of method 2 is $ 47,583.18 Method 2 is selected.

Which method should it select on the basis of a present worth analysis? (Include a minus sign if necessary.) The present worth of method 1 is $ -3,374.10 and that of method 2 is $ 47,583.18 Method 2 is selected.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Denger

Required information Lego Group in Bellund, Denmark, manufactures Lego toy construction blocks. The company is considering two methods for producing special-purpose Lego parts. Method 1 will have an initial cost of $430000, an annual operating cost of $145000, and a life of 3 years. Method 2 will have an initial cost of $630000, an operating cost of $140000 per year, and a 6-year life. Assume 10.00% salvage values for both methods. Lego uses an MARR of 14.00% per year. Which method should it select on the basis of a present worth analysis? (Include a minus sign if necessary.) The present worth of method 1 is $ -3,374.10 and that of method 2 is $ 47,583.18 Method 2 ✓is selected.
Transcribed Image Text:Required information Lego Group in Bellund, Denmark, manufactures Lego toy construction blocks. The company is considering two methods for producing special-purpose Lego parts. Method 1 will have an initial cost of $430000, an annual operating cost of $145000, and a life of 3 years. Method 2 will have an initial cost of $630000, an operating cost of $140000 per year, and a 6-year life. Assume 10.00% salvage values for both methods. Lego uses an MARR of 14.00% per year. Which method should it select on the basis of a present worth analysis? (Include a minus sign if necessary.) The present worth of method 1 is $ -3,374.10 and that of method 2 is $ 47,583.18 Method 2 ✓is selected.
Expert Solution
steps

Step by step

Solved in 3 steps with 4 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS