Problem 05.017 Alternative Comparison Different Lives Dexcon Technologies, Inc.,

Question

Problem 05.017 Alternative Comparison Different Lives 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? Method DDM 110,000 35,000 LS $-300,000 irst Cost M&O Cost, per Year Salvage Value 0,000 $4,000 2 years 17000 4 years ife The present worth for the DDM method is $ The present worth for the LS method is $ The | (Click to select) # method is selected

Explanation / Answer

DDM LS Initail Investment -110000 -300000 Annual M & O -35000 -10000 Annuity factor at 10% 1.73554 3.16987 Present value of M&O -60743.9 -31698.7 Less: Present value f Salvage DDM (4000*0.82645) 3306 LS (17000*0.68301) 11612 Net Present worth -167438 -320087 Divide: Annuity factor 1.73554 3.16987 Annualised present worth -96476 -100978 Present worth of DDM is ($167438) Present worth of LS is ($320087) The Project DDM is selected

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