A company plans to introduce a production line. Two production lines may be selected. For Production...

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A company plans to introduce a production line. Two production lines may be selected. For Production Line A, the initial purchasing cost is $200,000.00, and the maintenance cost is $2,850.00 for the first year, which will increase by G amount annually thereinafter. The annual benefit that Production Line A can generate (through product selling) is $44,500.00. The salvage value for Production Line A is $9,000.00. For Production Line B, the initial purchasing cost is $350,000.00, and the maintenance cost is $660.00 for the first year, which will increase by 3.5% annually thereinafter. The annual benefit that Production Line B can generate (through product selling) is $40,250.00. The salvage value for Production Line B is $20,000.00. For both production lines, the lifetime is 30 years. The present cost (i.e., benefit and salvage value not considered) for both production lines is the same. The interest rate is 8%. (A) Calculate the amount of G. (B) What is the present worth of Production Line A? (C) What is the present worth of Production Line B? (D) Which production line should the company choose? A company plans to introduce a production line. Two production lines may be selected. For Production Line A, the initial purchasing cost is $200,000.00, and the maintenance cost is $2,850.00 for the first year, which will increase by G amount annually thereinafter. The annual benefit that Production Line A can generate (through product selling) is $44,500.00. The salvage value for Production Line A is $9,000.00. For Production Line B, the initial purchasing cost is $350,000.00, and the maintenance cost is $660.00 for the first year, which will increase by 3.5% annually thereinafter. The annual benefit that Production Line B can generate (through product selling) is $40,250.00. The salvage value for Production Line B is $20,000.00. For both production lines, the lifetime is 30 years. The present cost (i.e., benefit and salvage value not considered) for both production lines is the same. The interest rate is 8%. (A) Calculate the amount of G. (B) What is the present worth of Production Line A? (C) What is the present worth of Production Line B? (D) Which production line should the company choose?

Answer rating: 100% (QA)

Part A Here we used the trial and error approach We tested several values in place of G highlighted in a thick line box in the table provided below until we got the Present cost at the end exactly equ... View the full answer