an expenditure of $20000 is made to modifya material handling system.this modifi

Question

an expenditure of $20000 is made to modifya material handling system.this modification will result 1st year saving of $2000,2nd year saving $4000 and a saving of $5000 per year thereafter.How many years the system last if a 18% return on investment is required?

Explanation / Answer

Let the system last for n years (n>2) For 18% return, total savings after n years = $20000 + 18% of $20000 = $20000 + $3600 = $23600 Savings for first 2 years = $2000 + $4000 = $6000 Savings after n years = $6000 + $5000 x (n-2) = $23600 => n = 5.52 Thus, the system lasts 5.52 (~6 years) if a 18% return on investment is required.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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