Fairmont Textile has a plant in which employees have been having trouble with carpal tunnel syndrome (CTS, an inflammation of the nerves that pass through the carpal tunnel, a tight space at the base of the palm), resulting from long-term repetitive activities, such as years of sewing. It seems as if 15 of the employees working in this facility developed signs of CTS over the last five years. DeepSouth, the company's insurance firm, has been increasing Fairmont's liability insurance steadily because of this problem. DeepSouth is willing to lower the insurance premiums to $16,000 a year (from the current $30,000 a year) for the next five years if Fairmont implements an acceptable CTS-prevention program that includes making the employees aware of CTS and how to reduce the chances of it developing. What would be the maximum amount that Fairmont should invest in the program to make it worthwhile? The firm's interest rate is 12% compounded annually.

Answer: Fairmont Textile has a plant in which employees have been having trouble with carpal tunnel syndrome (CTS, an inflammation of the nerves that pass through the carpal tunnel, a tight space at the base of the palm), resulting from long-term repetitive activities, such as years of sewing. It seems as if 15 of the employees working in this facility developed signs of CTS over the last five years. DeepSouth, the company's insurance firm, has been increasing Fairmont's liability insurance steadily because of this problem. DeepSouth is willing to lower the insurance premiums to $16,000 a year (from the current $30,000 a year) for the next five years if Fairmont implements an acceptable CTS-prevention program that includes making the employees aware of CTS and how to reduce the chances of it developing. What would be the maximum amount that Fairmont should invest in the program to make it worthwhile? The firm's interest rate is 12% compounded annually.