Reference no: EM133512519

Question: A company is considering two alternatives for manufacturing a certain part. Method R will have a first cost of $40,000, an annual operating cost of $25,000, and a $10,000 salvage value after its five-year life. Method S will have an initial cost of $100,000, an annual operating cost of $15,000 increasing by $600 each year thereafter, and a $13,000 salvage value after its 10-year life. At an interest rate of 12% per year, which alternative should be chosen? Use both present worth comparison and annual worth comparison (show your calculations).