The purchasing agent of large geotechnical testing firm

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Reference no: EM131546523

The purchasing agent of a large geotechnical testing firm is trying to decide whether to buy high carbon steel or carbide-tipped drilling tools for the drills used in the field to get soil samples. The carbide tools cost $2,000 and have an estimated life of 3 years. The steel tools cost $1, 400 but only last 2 years. If the company's minimum attractive rate of return is 20%, which alternative is the best? Salvage values are zero. a) Use the annual equivalent method b) Use the present worth method.

Reference no: EM131546523

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