Rubbermaid Plastics plans to purchase a rectilinear robot for pulling parts from an injection molding machine. Because of the robot's speed, the company expects production costs to decrease by $100,000 per year in each of the first 3 years and by $200,000 per year in the next 2 years. What is the present worth of the cost savings if the company uses an interest rate of 15% per year on such investments?

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Business

30 April, 12:24

Rubbermaid Plastics plans to purchase a rectilinear robot for pulling parts from an injection molding machine. Because of the robot's speed, the company expects production costs to decrease by $100,000 per year in each of the first 3 years and by $200,000 per year in the next 2 years. What is the present worth of the cost savings if the company uses an interest rate of 15% per year on such investments?

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Nathanial Sharp · Answer 1

The present worth of the cost savings if the company uses an interest rate of 15% per year on such investments is $442108.5079.

Explanation:

Present Worth = $100,000 / (1 + 15%) + $100,000 / (1 + 15%) ^2 + $100,000 / (1 + 15%) ^3 + $200,000 / (1 + 15%) ^4 + $200,000 / (1 + 15%) ^5

= $442108.5079

Therefore, the present worth of the cost savings if the company uses an interest rate of 15% per year on such investments is $442108.5079.