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You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses

Economics Apr 08, 2021

You have been asked to evaluate two alternatives, X and Y, that may increase plant capacity for manufacturing high-pressure hydraulic hoses. The parameters associated with each alternative have been estimated. Which one should be selected on the basis of a present worth comparison at an interest rate of 11% per year? Why is yours the correct choice? 
'Alternative  X  Y '
First Cost  $-35,000  $-90,000 
Maintenance cost, per Year $-15000 $-2000 '
Salvage Value  $4,500  $5,500 '
Life  5 years  5 years 

The present worth of alternative X is $......... and that of alternative Y is $ ...........
Alternative ..........is selected by the company. 
 

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