Decision making based on Cost
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One of two methods must be used to produce expansion anchors. Method A costs $50000 initially and will have a $8000 salvage value after 3 years. The operating costs with this method will be $22000 per year. Method B will have a first cost of $100000, an operating cost of $8000 per year, and a $32000 salvage value after its 3year life. The interest rate for both the methods is 12%. Which method should be used on the basis of a present worth analysis?
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