Question

Chrysler is considering a cost reduction program. The suppliers must reduce the cost of the components that they furnish to Chrysler by 5% each year. (The total amount of savings would increase each year.) The initial costs: $12,500,000 1,300,000 8,500,000 Program Setup Feasibility Study (completed six months ago) Supplier Training Chrysler is currently paying a total of $90,000,000 per year for components purchased from the vendors who will be involved in this program. (Assume that, if the program is not approved, the annual cost of purchased components will remain constant at $90,000,000 per year.) The program has been designed as a five-year initiative, and Chrysler's MARR for such projects is 15% ( There will be annual operating expenses associated with the program for further training of vendors, updating internal documentation, and so on. Given the projected savings in purchased components, what would be the maximum annual operating expense for this program such that it is marginally justified? Assume that the EOY 1 cost for purchased components is $90,000,000 Click the icon to view the interest and annuity table for discrete compounding when i 15% per year The PW if the program is approved is $L million. (Round to one decimal place.) More Info Discrete Compounding: 1-15% Uniform Series Compourn Compound Amount Factor To FindF Given A FIA 1.0000 2.1500 3.4725 Present Worth Factor To Find P Given A Amount Present Recovery Factor To Find A Given F Factor Worth Factor To FindF Given P To Find P Given F To Find A Given P 1.1500 1.3225 1.5209 1.7490 1.1500 0.6151 0.4380 0.3503 0.2983 0.2642 0.2404 0.8696 0.8696 1.0000 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 2.8550 3.3522 3.7845 4.1604 44873 0.2003 0.1483 0.1142 0.0904 0.0729 4 2.3131 2.6600 3.0590 3.5179 4.0456 4.6524 5.3503 6.1528 7.0757 8.1371 9.3576 6.7424 8.7537 11.0668 13.7268 16.7858 20.3037 24.3493 29.0017 34.3519 40.5047 47.5804 55.7175 65.0751 75.8364 88.2118 102.4436 5.0188 5.2337 5.4206 0.0493 0.0411 0.0345 0.0291 0.0247 0.2096 0.1993 0.1911 0.2149 0.1869 12 13 5.5831 0.1791 0.1413 0.1229 0.1069 0.0929 0.0808 0.0703 0.0611 5.8474 5.9542 6.0472 0.0179 0.0154 0.1710 0.1679 12.3755 14.2318 16.3665 Enter vour 6.1280 0.0113 0.0098 0.1613 0.1598 6.2593 narts

Answer 1