You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 13% per year? Why is yours the correct choice? Alternative First Cost X $-45,000 Maintenance cost, per $-9000 $1,000 5 years Year Salvage Value Life Y $-55,000 $4000 $6,500 5 years The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4 Alternative X is selected by the company
You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 13% per year? Why is yours the correct choice? Alternative First Cost X $-45,000 Maintenance cost, per $-9000 $1,000 5 years Year Salvage Value Life Y $-55,000 $4000 $6,500 5 years The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4 Alternative X is selected by the company
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic
hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present
worth comparison at an interest rate of 13% per year? Why is yours the correct choice?
Alternative
First Cost
X
$-45,000
Maintenance cost, per
$-9000
Year
Salvage Value
$1,000
Life
5 years
Y
$-55,000
$-4000
$6,500
5 years
The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4
Alternative X
is selected by the company.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F27f89602-a1b2-4a2f-b3ab-d3f428c6210d%2F8f95dc65-17c1-49d1-8351-9f70d40493b1%2F2dk1o09_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic
hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present
worth comparison at an interest rate of 13% per year? Why is yours the correct choice?
Alternative
First Cost
X
$-45,000
Maintenance cost, per
$-9000
Year
Salvage Value
$1,000
Life
5 years
Y
$-55,000
$-4000
$6,500
5 years
The present worth of alternative X is $ 13888 and that of alternative Y is $ 44459.4
Alternative X
is selected by the company.
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