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 15% per year, which alternative has the lower present worth? DDM $-240,000 -30,000 $2,000 2 years LS $-480,000 $-15,000 $23,000 4 years Method rst t Cost M&O Cost, per Year alvage Value fe The present worth for the DDM method is $ -507115 The present worth for the LS method is $365,28 The DDM method is selected.

Explanation / Answer

For DDM method, we use 2 cycles because LCM is 4 and we need to repeat DDM for 2 more years.

Present worth of DDM method in 2 years = -240,000 – 30,000(P/A, 15%, 2) + 2,000(P/F, 15%, 2)

= -240,000 – 30,000*1.625709 + 2,000*0.756144

= -$287,258.98

Present worth of DDM method = -$287,258.98 -$287,258.98(P/F, 15%, 2)

= -$287,258.98 - $287,258.98*0.756144

= -$504,468.13

Present worth of LS method = -480,000 – 15,000(P/A, 15%, 4) + 23,000(P/F, 15%, 4)

= -480,000 – 15,000*2.854978 + 23,000*0.571753

= -$509,674.35

Since DDM method has a cheaper cost we select DDM

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.