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 auseful life of 15 years. At theend of its useful life, the punch has no salvage value. Annual labor costs would increase S2,000 using the gang punch, butannualraw materialcosts would decrease S12,000. MARR is 5 percent/year
a. What is the present worth of this investment?
b. What is the decision rule for judging the attractiveness of investments based on present worth?
c. Should Bailey buy the gang punch?
Answers: 3
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