Chrysler is considering a cost reduction program. The suppliers must reduce the cost of the components that they furnish to Chrysler by

44%

each year. (The total amount of savings would increase each year.) The initial costs:

bullet Program Setup:	$13 comma 500 comma 00013,500,000
bullet Feasibility Study (completed six months ago):	1 comma 600 comma 0001,600,000
bullet Supplier Training:	6 comma 500 comma 0006,500,000

Chrysler is currently paying a total of

$80 comma 000 comma 00080,000,000

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

$80 comma 000 comma 00080,000,000

per year.) The program has been designed as a five-year initiative, and Chrysler's MARR for such projects is

1010%

(im).

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

$80 comma 000 comma 00080,000,000.

hrysler is considering a cost reduction Program. The supp iers must red uce he cost o the com nents hat e r is to hrysler by % each ear he ot al amount of savings would increase each er. heitial costs. Program Setup: Feasibility Study (completed six months ago) 1,600,000 Supplier Training Chrysler is currently paying a total of $80,000,000 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 S80,000,000 per year. The program has been designed as a five-year initiative, and Chrysler's MARR or su roject 10% 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 $80,000,000 $13,500,000 6,500,000 Click the icon to view the interest and annuity table for discrete compounding when ,-10% per yea The PW if the program is approved is S. million. (Round to one decimal place.) Discrete Compounding: 10% Single Payment Uniform Series Capital Recovery Factor To Find A Given P A/P 1.1000 0.5762 0.4021 0.3155 0.2638 0.2296 0.2054 0.1874 0.1736 0.1627 Compound Amount Compound Amount Factor To Find F Given A Sinking Fund Factor To Find A Given F A/F 1.0000 0.4762 0.3021 0.2155 0.1638 0.1296 0.1054 0.0874 0.0736 0.0627 Present Present Worth Factor To Find P Given A P/A 0.9091 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 Factor Worth Factor To Find F Given P F/P 1.1000 1.2100 1.3310 1.4641 1.6105 1.7716 1.9487 2.1436 2.3579 2.5937 To Find P Given F P/F 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 FIA 1.0000 2.1000 3.3100 4.6410 6.1051 7.7156 9.4872 11.4359 13.5795 15.9374 18 531264951 6 10 853103505 0540 1540 Print Done