Business, 02.03.2021 02:40 Chanz2104

Two methods can be used to produce expansion anchors. Method A costs $70,000 initially and will have a $19,000 salvage value after 3 years. The operating cost with this method will be $29,000 in year 1, increasing by $3800 each year. Method B will have a first cost of $109,000, an operating cost of $9000 in year 1, increasing by $9000 each year, and a $39,000 salvage value after its 3-year life. At an interest rate of 9% per year, which method should be used on the basis of a present worth analysis?

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Answer from: ebookhardt917

Method B should be used on the basis of a present worth analysis.

Explanation:

Given - Two methods can be used to produce expansion anchors.

Method A costs $70,000 initially and will have a $19,000

salvage value after 3 years. The operating cost with this method

will be $29,000 in year 1, increasing by $3800 each year.

Method B will have a first cost of $109,000, an operating cost of

$9000 in year 1, increasing by $9000 each year, and a $39,000

salvage value after its 3-year life.

To find - At an interest rate of 9% per year, which method should be used

on the basis of a present worth analysis?

Proof -

Method A :

Year Initial Cash Net cash Discount Present value

Investment Outflow flow rate

0 70,000 - 70,000 1 70,000

1 29,000 29,000 0.917 26,593

2 32,800 32,800 0.842 27,617.6 3 -19,000 36,600 17,600 0.772 13,587.2

Present Worth $137,797.8

Method B :

Year Initial Cash Net cash Discount Present value

Investment Outflow flow rate

0 109,000 - 109,000 1 109,000

1 9,000 9,000 0.917 8253

2 18,000 18,000 0.842 15,156

3 -39,000 27,000 -12,000 0.772 -9,264 Present Worth $123,145

∴ we get

Present Worth of A = $137,797.8

Present Worth of B = $123,145

Now,

As the present worth is low in Method B, so Method B should be used.

Answer from: Quest

Ithink b hope that

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

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Two methods can be used to produce expansion anchors. Method A costs $70,000 initially and will have...

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