Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 23

Apex Corporation requires a chemical finishing process for a product under contract for a period of six years. Three options are available. Neither option 1 nor option 2 can be repeated after its process life. However, option 3 will always be available from H H Chemical Corporation at the same cost during the period that the contract is operative. Here are the options:
• Option 1: Process device A, which costs $100,000, has annual operating and labor costs of $60,000 and a useful service life of four years with an estimated salvage value of $ 10,000.
• Option 2: Process device B, which costs $150,000, has annual operating and labor costs of $50,000 and a useful service life of six years with an estimated salvage value of $30,000.
• Option 3: Subcontract out the process at a cost of $100,000 per year.
According to the present-worth criterion, which option would you recommend at i = 12%