What is the future worth of this investment

Assignment Help Microeconomics

Reference no: EM131021559

Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $2,000 using the gang punch, but annual raw material costs would decrease $12,000. MARR is 5 percent/year.

a. What is the future worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on future worth?

c. Should Bailey buy the gang punch?

Reference no: EM131021559

Questions Cloud

Was the local electric company a monopoly : The great baseball player Ty Cobb was known for being very thrifty. Near the end of his life, he was interviewed by a reporter who was surprised to find that Cobb used candles, rather than electricity, to light his home. From Ty Cobb's point of v..

What will be the percentage change in the bond price : A bond has a coupon rate of 8 percent, 7 years to maturity, semiannual interest payments, and a YTM of 7 percent. If interest rates suddenly rise by 2 percent, what will be the percentage change in the bond price?

About the interest rate risk of lower-coupon bonds : Bond J has a coupon rate of 3 percent. Bond K has a coupon rate of 9 percent. Both bonds have 19 years to maturity, make semiannual payments, and have a YTM of 6 percent. If interest rates suddenly rise by 2 percent, what is the percentage price chan..

The inflation rate will be over the next year : An investment offers a total return of 18 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 13 percent. What does Janice believe the inflation rate will be over the next year?

What is the future worth of this investment : The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $2,000 using the gang punch, but annual raw material costs would decrease $12,00..

Directed to deposit an amount of money quarterly : Your company must make a $750,000 balloon payment on a lease 2 years and 9 months from today. You have been directed to deposit an amount of money quarterly, beginning today, to provide for the $750,000 payment. The account pays 8% per year, compound..

What does neuroscience tell us about this behavior : If people were logical and thought long term, no one would eat more doughnuts than fruit, no one would start smoking, no one would fail to save money for their retirement. So, why do so many people have bad eating habits, addictive behavior, and n..

The rewards associated with global business operations : Prepare a paper that addresses the political and business risks and the rewards associated with global business operations. Include a discussion of the impact of monetary exchange rates on corporate profits (CO 9).

What is the present value of this investment : Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this invest..

User Account

All Pages