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 11% per year? Why is yours the correct choice? Alternative X Y First Cost $-30,000 $-60,000 Maintenance cost, per year $-9000
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 11% per year? Why is yours the correct choice? Alternative X Y First Cost $-30,000 $-60,000 Maintenance cost, per year $-9000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 11% per year? Why is yours the correct choice?
| Alternative | X | Y |
| First Cost | $-30,000 | $-60,000 |
| Maintenance cost, per year | $-9000 | $-3000 |
| Salvage Value | $1,500 | $2,500 |
| Life | 5 years | 5 years |
The present worth of alternative X is $ __ and that of alternative Y is$ __.
Alternative __ is selected by the company.
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