Required information
Lego Group in Bellund, Denmark, manufactures Lego toy construction blocks. The company is considering two methods
for producing special-purpose Lego parts. Method 1 will have an initial cost of $380,000, an annual operating cost of
$120,000, and a life of 3 years. Method 2 will have an initial cost of $580,000, an operating cost of $90,000 per year, and
a 6-year life. Assume 15% salvage values for both methods. Lego uses an MARR of 9% per year.
If the evaluation is incorrectly performed using the respective life estimates of 3 and 6 years, will Lego make a correct or incorrect
economic decision? Explain your answer.
The present worth of method 1 is $
Method (Click to select) is selected.
and that of method 2 is $
