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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