How much can the company afford to spend

Reference no: EM131004316

Plastics Engineering Inc., a developer of advanced belt drive components, recently began manufacturing sprockets made of polyacetal plastics that are approved for direct food contact. The company claims that high-precision manufacturing allows for greater belt life, eliminating costs associated with replacing belts. If Kraft Foods estimates that maintenance down time costs the company an average of $12,000 per quarter, how much can the company afford to spend now if the new sprockets would cut their cost to $2000 per quarter? Assume Kraft Foods uses an interest rate of 12% per year com- pounded quarterly and a 2-year cost recovery period.

Reference no: EM131004316

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