ASM International, an Australian steel company, claims that a savings of 40% of

Question

ASM International, an Australian steel company, claims that a savings of 40% of the cost of stainless steel threaded bar can be achieved by replacing machine threads with precision weld depositions. A U.S. manufacturer of rock bolts and grout-in fittings plans to purchase the equipment. A mechanical engineer with the company has prepared the following cash flow estimates. Determine the expected rate of return per quarter and per year (nominal)
Quarter Cost, $ Savings, $
0 -450,000 -
1 -50,000 10,000
2 -40,000 20,000
3 -30,000 30,000
4 -20.000 40,000
5 -10.000 50,000
6

Explanation / Answer

0 = -450,000 – [50,000(P/A,i%,5) –10,000(P/G,i%,5)] + 10,000(P/A,i%,5) +10,000(P/G,i%,5) + 80,000(P/A,i%,7)(P/F,i%,5) Solve by trial and error or Excel i = 2.36% per quarter (Excel) i = 2.36(4) i = 9.44% per year (nominal)

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.