Your friend is considering a new exhaust system for his Lamborghini Diablo. The estimates from the two shops are shown in the following table. Besides installation, shop Y includes a full replacement warranty for 4 years in the quote. Since money does not appear to be a problem for your friend, and he asked you about the economics of the two quotes, which should he choose based on annual worth values and an interest rate of 12% per year? Shop Installed cost, $ Total AOC, $/year Salvage value, $ Life, years The annual worth value of shop X is $- 5003.075 The shop that your friend has to select on the basis of the annual worth analysis is Y X -2,250 -1,200 125 2 Y -3,400 -900 900 4 and the annual worth value of shop Y is $- 10654.87
Your friend is considering a new exhaust system for his Lamborghini Diablo. The estimates from the two shops are shown in the following table. Besides installation, shop Y includes a full replacement warranty for 4 years in the quote. Since money does not appear to be a problem for your friend, and he asked you about the economics of the two quotes, which should he choose based on annual worth values and an interest rate of 12% per year? Shop Installed cost, $ Total AOC, $/year Salvage value, $ Life, years The annual worth value of shop X is $- 5003.075 The shop that your friend has to select on the basis of the annual worth analysis is Y X -2,250 -1,200 125 2 Y -3,400 -900 900 4 and the annual worth value of shop Y is $- 10654.87
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Your friend is considering a new exhaust system for his Lamborghini Diablo. The estimates from the two shops are
shown in the following table. Besides installation, shop Y includes a full replacement warranty for 4 years in the quote.
Since money does not appear to be a problem for your friend, and he asked you about the economics of the two
quotes, which should he choose based on annual worth values and an interest rate of 12% per year?
Shop
Installed cost, $
Total AOC, $/year
Salvage value, $
Life, years
The annual worth value of shop X is $- 5003.075 ), and the annual worth value of shop Y is $- 10654.87
The shop that your friend has to select on the basis of the annual worth analysis is
Y
X
-2,250
-1,200
125
2
Y
-3,400
-900
900
4](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9e8bb4f4-f1f5-485b-9f10-742ed8c4fa5c%2F9d183f24-6a7e-4c60-bd8a-8b158125278c%2F7uvifqy_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your friend is considering a new exhaust system for his Lamborghini Diablo. The estimates from the two shops are
shown in the following table. Besides installation, shop Y includes a full replacement warranty for 4 years in the quote.
Since money does not appear to be a problem for your friend, and he asked you about the economics of the two
quotes, which should he choose based on annual worth values and an interest rate of 12% per year?
Shop
Installed cost, $
Total AOC, $/year
Salvage value, $
Life, years
The annual worth value of shop X is $- 5003.075 ), and the annual worth value of shop Y is $- 10654.87
The shop that your friend has to select on the basis of the annual worth analysis is
Y
X
-2,250
-1,200
125
2
Y
-3,400
-900
900
4
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