Dexcon Technologies, Inc., is evaluating two alternatives to produce its new pla

Question

Dexcon Technologies, Inc., is evaluating two alternatives to produce its new plastic filament with tribological (i.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 10% per year, which alternative has the lower present worth? LS Method First Cost M&o Cost, per Year Salvage Value Life DDM $-230,000 $-45,000 $4,000 2 years $-410,000 $-35,000 $15,000 4 years The present worth for the DDM method is $ The present worth for the LS method is $ Thé / (Click to select) method is selected. DDM LS

Explanation / Answer

Answer
Here we will use the 4 years for both methods because that is the LCM of the term and this should be compared on the same years

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

PW of method DDM=-230000-45000*(P|A,10,4)-226000*(P|F,10,2)+4000*(P|F,10,4)
here the second time cost is deducted from SV of first time
PW=-230000-45000*3.170-226000*0.8264+4000*0.6830
=-556684.4

PW of method LS=-410000-35000*3.170+15000*0.6830
=-510705

PW of costs of method LS is lower in absolute term so it should be selected for production

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