Two methods can be used to produce solar panels for electric power generation. Method 1 will have an initial cost of $600,000, an AOC of $160,000 per year, and $175,000 salvage value after its 3-year life. Method 2 will cost $870,000 with an AOC of $175,000 and a $250,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a three-year planning period. You estimate the salvage value of Method 2 will be 30% higher after three years than it is after five years. If the MARR is 10% per year, which method should the company select? The company should select (Click to select) ▼. (Click to select) method 1 method 2
Two methods can be used to produce solar panels for electric power generation. Method 1 will have an initial cost of $600,000, an AOC of $160,000 per year, and $175,000 salvage value after its 3-year life. Method 2 will cost $870,000 with an AOC of $175,000 and a $250,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a three-year planning period. You estimate the salvage value of Method 2 will be 30% higher after three years than it is after five years. If the MARR is 10% per year, which method should the company select? The company should select (Click to select) ▼. (Click to select) method 1 method 2
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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