Question

Costs associated with the manufacture of miniature high-sensitivity piezoresistive pressure transducers is $78,000 per year. A clever industrial engineer found that by spending $16,000 now to reconfigure the production line and reprogram two of the robotic arms, the cost will go down to $55,000 next year and $50,000 in years 2 through 5. Using an interest rate of 8% per year, determine the present worth of the savings due to the reconfiguration. The present worth of the savings is determined to be $ < Pray 4 of 5 !!! Next > Search

Answer 1

Present worth the savings = Present worth of the savings from year 1 to year 5

PW = $ 55,000 $\times$ (P/F, 8% , 1 year) + $ 50,000 $\times$ ( P/A , 8 % , 4 years) $\times$ ( P/F , 8% , 1 year)

Where  (P/F, 8% , 1 year) = Single payment present worth

( P/A , 8 % , 4 years) = Uniform series present worth

PW of the savings = $ 55,000 $\times$ 0.925926 + $ 50,000 $\times$ 3.312127  $\times$ 0.925926

PW of the savings = $ 204,265.2 $\approx$ $ 204,265