Question: In a new highly automated factory, labor costs are expected to decrease at an annual rate of 5%; material costs will increase at an

In a new highly automated factory, labor costs are expected to decrease

In a new highly automated factory, labor costs are expected to decrease at an annual rate of 5%; material costs will increase at an annual rate of 4%; overhead costs will increase at 8%. The labor, material and overhead costs at the end of year 1 are $2 million, $3 million and $ 1.6 million, respectively. The time value of money rate is 11% and the time horizon is 7 years. Determine the dollar value for each cost category (labor, material, overhead) for each year and determine the total cost for each year. b. Determine the present worth of each cost category and the total cost c. Determine the annual worth over 7 years that is equivalent to the present worth of the total cost

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