Josh Ritchey has just been hired as a cost engineer by a large airlines company. Josh's first

Question:

Josh Ritchey has just been hired as a cost engineer by a large airlines company. Josh's first idea is to quit giving complimentary cocktails, wine, and beer to the international flying public. He calculates this will save 5,000,000 drinks per year, and each drink costs $0.50, for a total of $2.5 million per year. Instead of complimentary drinks, Josh estimates that the airlines company can sell 2,000,000 drinks at $5.00 per drink. The net savings would amount to $12.5 million per year! Josh's boss really likes the idea and agrees to give Josh a lump-sum bonus now equaling 0.1 % of the present equivalent worth of three years of net savings. If the company's is 20% per year, what is Josh's bonus?
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...