Question

Lobo is a leading manufacturer of positronic brains, a key component in robots. The company is considering two alternative production methods. The costs and lives associated with each are:

Year	Method 1				Method 2
0		$	6,700			$	9,900
1			400				620
2			400				620
3			400				620
4							620

Assuming that Lobo will not replace the equipment when it wears out, what is the present value of both methods (r = 13%)? Ignore depreciation and taxes in answering. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Present value
Method 1	$
Method 2	$

Based on present value, which method should Lobo buy?

Method 1 Method 2

If Lobo is going to replace the equipment, what is the present value of both methods (r = 13%)? Ignore depreciation and taxes in answering. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Present value
Method 1	$
Method 2	$

Based on present value, which method should Lobo buy?

Method 1 Method 2

Answer 1