Chock my work 3 Dexcon Technologies, Inc., Is evaluating two alternatives to pro

Question

Chock my work 3 Dexcon Technologies, Inc., Is evaluating two alternatives to produce its new plastic filament with tribological (.e, low friction properties for creating custom bearings for 3-D printers. The estimates associated with each alternative are shown below. Using a MARR of 17% per year, which alternative has the lower present worth? 10 points ethod irst Cost 8O Cost, per Year DDM $-100,000 $40,000 $6,000 years LS $-500,000 $25,000 $27,000 4 years eBook Hint Print References alvage Value The present worth for the DDM method is $ The present worth for the LS method is $ The (Cick to solect) method Is selected.

Explanation / Answer

Answer
There is the difference of life of project so we will take the LCM of the years as life, the LCM of 2 and 4 is 4
so years for both project is 4 years

PW=-C-A*(P|A,i,n)+SV*(P|F,i,n)
C=first cost
A=annual cost
SV=salvage value
i=17%
n=4

PW of DDM method =-100000-40000*(P|A,17%,4)-96000*(P|F,17%,2)+6000*(P|F,17,4)
the 96000 is the value of the first cost after two years because the project life is 2 years which given reducing for salvage value.

PW of DDM method =-100000-40000*2.74323501-96000*0.73051355+6000*0.533650048
=-276656.801

PW of LS method =-500000-25000*2.74323501+27000*0.533650048
=-554172.324
The DDM project will be selected because the absolute cost of it is lower than the LS method

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