Repeat Problem 9 assuming that the cost of capital has increased due to weak market conditions and

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Repeat Problem 9 assuming that the cost of capital has increased due to weak market conditions and MARR is now 6 percent/year.

Data from problem 9

Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of \(\$ 100,000\) and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase \(\$ 2,000\) using the gang punch, but annual raw material costs would decrease \(\$ 12,000\). MARR is 5 percent/year.

a. What is the present worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on present worth?

c. Should Bailey buy the gang punch?

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Principles Of Engineering Economic Analysis

ISBN: 9781118163832

6th Edition

Authors: John A. White, Kenneth E. Case, David B. Pratt

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