Ford Motor Company was able to reduce by 80% the cost required for installing da

Question

Ford Motor Company was able to reduce by 80% the cost required for installing data acquisition instrumentation on test vehicles by using MTS-developed spinning wheel force transducers. (a) If this year's cost (i.e., end of year 1) is expected to be $2000, what was the cost the year before installation of the transducers? (b) If the costs are expected to increase by $250 each year for the next 4 years (i .e., through year 5), what is the equivalent annual worth of the costs (years 1 through 5) at an interest rate of 18% per year? Please use P=A(P/A, i, n) or whatever you use instead of NPV or PMT (The Excel methods)

Explanation / Answer

a)

cost is reduced by 80%

hence cost before installation was = 2000/.2 = 10000

b) costs for 5 years would be = 2000,2250,2500,2750,3000

pv of all costs =NPV(0.18,2000:3000) = $7,562.15

hence equivalent annual worth of costs at 18% =PMT(0.18,5,7562.15) = $2,418.21

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

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