Answer:
Annual benefit provided by New system = $1,325
Explanation:
Given:
Tangible cost = $15,000
Intangible cost = $250,000
Frequency of injuries = 0.01 per year
New frequency of injuries = (0.01)/2 = 0.005 per year
Computation:
Total cost = Tangible cost + Intangible cost
Total cost = $15,000 + $250,000
= $265,000
Before New system installation:
Expected cost per year = Total cost per incident x Frequency of injuries
Expected cost per year = $265,000 x 0.01 = $2,650
After New system installation: .
Expected cost per year = Total cost per incident x New frequency of injuries
Expected cost per year = $265,000 x 0.005 = $1325
Annual benefit = $2,650 - $1,325 = $1,325
