Scarcity is imposed on individual households in the form of income and Select one: a. limited production. b. utility. c. sunk co
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Answer:
Year 3 cashflow:
current system: 243,360
alternative system: 102,240
Present cost:
current system PV -$971,665.9146
alternative system PV -$1,075,964.17
Explanation:
<u>Current Scenario:</u>
42,000 inspection cost
<u>Repairs:</u>
1,520 identified x $75 = 114,000
<u>Refunds:</u>
480 units x $182 = 87,360
Total yearly cost: 243,360
PV of an annuity of $243,360 during 5 years:
Present Value of Annuity
C 243,360
time 5
rate 0.08
PV $971,665.9146
<u>New Scenario:</u>
Inspection cost: $42,000 + $25,000 = $77,000
Repair cost: 350 units x $41 = $14,320
Refunds: 50 units x $182 x 120% = $10,920
Total yearly cost: $102,240
F0 cost:
470,000 workers trainings
210,000 purchase cost
Total F0 cost: 680,000
Present Value of Annuity
C 102,240
time 5
rate 0.08
PV $408,214.6742
PV of residual value:
PRESENT VALUE OF LUMP SUM
Maturity 18,000.00
time 5.00
rate 0.08
PV 12,250.50
Net present value:
- 680,000 -408,214.67 + 12,250.50 = 1,075,964.17