An automotive components manufacturing business is planning to expand into a new product line somewhat related to its exisitng products. The intial cost (first cost) of the line is $489,000 with an annual cost of $154,000 per year. The anticipated income is $314,000 per year. The life of the project is 6 years and the interest rate on the capital is 16%. There salvage value at the end of 6 years is $82,000.
1. Show the time line diagram of the project.
2. Determine the present worth of the project, including both costs and incomes.
3. Determine the annual worth of the project, including both costs and incomes. (using present worth and mulitply it by the appropriate A/P)
4. Is the project worth while?
5. to what alternative is this being compared?