Question: Solve and answer 4. A certain ventilation system would cost a firm approximately $60,000, which can be amortized over its useful life at a cost

Solve and answer

4. A certain ventilation system would cost a firm approximately $60,000, which can be amortized over its useful life at a cost of $15,000 per year. Annual maintenance costs are expected to be $600 per year and monthly operating costs (utilities) $150 per month. The system is expected to facilitate production by reducing the amount of machine cleaning for an expected annual savings of $1200 per year. The primary benefit of the proposed ventilation system is expected to be the elimination of the need for respirators, which cost the company $4000 per year in equipment, maintenance, employee training, and respiratory system management. The ventilation system is expected to reduce short-term-illness complaints by an average of 6 per year and long-term illnesses by an average of 0.2 per year. Short-term illnesses result in a total cost of $600 per occurrence, including intangibles. Long-term illnesses are expected to result in a total cost of $30,000 per occurrence, including intangibles. Use a cost-benefit analysis to determine whether the ventilation system should be installed. What is the primary benefit of the ventilation system? ( 3.25, pg. 85)

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