A new shoe production line is being designed at a cost of $245,000 and operating costs areexpected to be $84,000 per year. Planned annual production is 2500 pairs and the price of a pair ofshoes is $110. The line's service life is 14 years, the depreciation rate is 25%. Use a 19% annual interestrate for the base case. Using the interval [-20%, -10%, +10%, +20%], perform a present worthsensitivity analysis using a sensitivity graph with respect to the following variables in terms of theirimpact on the Present worth.a) First Costb) Operative costc) Annual Productiond) Salvage Value
A new shoe production line is being designed at a cost of $245,000 and operating costs areexpected to be $84,000 per year. Planned annual production is 2500 pairs and the price of a pair ofshoes is $110. The line's service life is 14 years, the depreciation rate is 25%. Use a 19% annual interestrate for the base case. Using the interval [-20%, -10%, +10%, +20%], perform a present worthsensitivity analysis using a sensitivity graph with respect to the following variables in terms of theirimpact on the Present worth.a) First Costb) Operative costc) Annual Productiond) Salvage Value
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
A new shoe production line is being designed at a cost of $245,000 and operating costs are
expected to be $84,000 per year. Planned annual production is 2500 pairs and the price of a pair of
shoes is $110. The line's service life is 14 years, the
rate for the base case. Using the interval [-20%, -10%, +10%, +20%], perform a present worth
sensitivity analysis using a sensitivity graph with respect to the following variables in terms of their
impact on the Present worth.
a) First Cost
b) Operative cost
c) Annual Production
d) Salvage Value
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 1 steps with 2 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education