To increase capacity, a project team must decide between two…
To increase capacity, a project team must decide between two weaving looms. Both looms have comparable capacity and quality levels, but different costs. The team must evaluate the costs over a five-year study period, with an MARR (an interest rate) of 8% per year. Loom 1: The Josef Loom will cost $11,500 now, have operating costs of $500 per year, and have a salvage value of $1,500 after 5 years. Loom 2: The Jurgens Loom will cost $9,500 now, have operating costs of $1,000 per year, and have a salvage value of $2,500 after 5 years. What is the net present worth of the cash flows for Loom 1? [loom1] What is the net present worth of the cash flows for Loom 2? [loom2] Which loom should the team select? [select]
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