Answer to Question #273168 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question

If produced by Method A, a product’s initial capital cost will be $100,000, its operating cost will be

$20,000 per year, and its salvage value after 3 years will be $20,000. With Method B there is a first cost

of $150,000, an operating cost of $10,000 per year, and a $50,000 salvage value after its 3-year life.

Based on a present worth analysis at a 15% interest rate, which method should be used?

Answer 1

Both methods with their table are given below: