A new shoe production line is being designed at a cost of$293,000 and operating costs areexpected to be $61,000 per year. Planned annual production is2800 pairs and the price of a pair ofshoes is $77. The line's service life is 12 years, the depreciationrate is 20%. Use a 8% 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 thefollowing variables in terms of theirimpact on the Present worth.a) First Costb) Operative costc) Annual Productiond) Salvage Value

Approach to solving the question:For salvage value, the formula is S = P- ( I * Y )WhereS = Salvage…

Answered: A new shoe production line is being…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 47P

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