Analysis of two different designs for a safety closure

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Julia must select between two different designs for preventing closure, which will be in use indefinitely. Model 1st has a life of 3-years and cost of $8000, and maintenance of $1000 per year. Model B will last four years, has a first cost of $10,000, and has maintenance of $800 per year. A salvage value can be estimated for Model A using a depreciation rate of 40% and declining-balance depreciation, while a salvage value for Model B can be estimated using straight-line depreciation and the knowledge that after one year its salvage value will be $7500. Interest is at 14%. Using a present worth analysis, which design is better?

Reference no: EM1375772

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