Waverly Ltd produces commercial grade washing machines. The Karewasher is currently selling for $2000 per unit. The company wants to introduce a new model, Supawasher, which uses less water per load. The comparative life-time costs of the two models are as follow:
The economic value of a Supawasher (ignore time value of money) is:

Question

Waverly Ltd produces commercial grade washing machines. The Karewasher is currently selling for $2000 per unit. The company wants to introduce a new model, Supawasher, which uses less water per load. The comparative life-time costs of the two models are as follow: 
The economic value of a Supawasher (ignore time value of money) is:

Quizplus · Accepted Answer

To calculate the economic value of Supawasher, we need to subtract the lifetime cost of Supawasher from the lifetime cost of Karewasher. 
Lifetime cost of Karewasher = $2000 + $400 + $1200 = $3600 
Lifetime cost of Supawasher = $1600 + $200 + $1000 = $2800 
Therefore, Economic value of Supawasher = $3600 - $2800 = $800 
So, the answer is B as the economic value of Supawasher is $800, so the company can sell it at $2000+$800=$2800 which is less than $3600 (the lifetime cost of Karewasher).

Waverly Ltd Produces Commercial Grade Washing Machines