The engineering department of a large firm is overly crowded. In many cases, several engineers share one office. It is evident that the distraction caused by the crowded conditions reduces the productive capacity of the engineers considerably. Management is considering the possibility of providing new facilities for the department, which could result in fewer engineers per office and a private office for some. For an office presently occupied by five engineers, what minimum individual increase in effectiveness must result to warrant the assignment of only three engineers to an office if the following data apply?
• The office size is 16 X 20 feet.
• The average annual salary of each engineer is $80,000.
• The cost of the building is $110 per square foot.
• The estimated life of the building is 25 years.
• The estimated salvage value of the building is 10% of the initial cost.
• The annual taxes, insurance, and maintenance are 6% of the initial cost.
• The cost of janitorial service, heating, and illumination is $5.00 per square foot per year.
• The interest rate is 12%.
Assume that engineers reassigned to other office space will maintain their present productive capability as a minimum.