Assignment:
Synta Manufacturing Company is considering purchase of new oven to dry its painted optical tube assemblies.
Alternative 1: Conventional oven will cost $100,000 and can be expected to last 5 years, with a salvage value of $10,000. Operating costs will be $24,000 per year.
Alternative 2: Convection oven will cost $140,000, should last 5 years, and will have a salvage value of $12,000. The operating costs will be $12,000 per year.
Assume the services provided by the ovens are identical. Assume an interest rate of 10%
a) Compare the annual equivalent costs of the 2 alternatives.
b) Make a recommendation for selection.
Provide complete and step by step solution for the question and show calculations and use formulas.