Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 37

An electric switch manufacturing company has to choose one of three different assembly methods. Method A will have a first cost of $40,000, an annual operating cost of $9000, and a service life of 2 years. Method B will cost $80,000 to buy and will have an annual operating cost of $6000 over its 4-year service life. Method C will cost $130,000 initially with an annual operating cost of $4000 over its 8-year life. Methods A and B will have no salvage value, but method C will have some equipment worth an estimated $12,000. Which method should be selected Use present worth analysis at an interest rate of 10% per year.