The following are two independent questions.

(a) The Delta Company sells a new type of pecan shelling machine that it claims will save a constant amount of labor costs at a particular company each year for 10 years. Delta suggests that this savings would have a present value (at 16%) of $14,499.60 to the company. What is the amount of the annual labor cost savings being claimed?

(b) The Sigma Company sells a small mechanical apparatus with a complicated solidstate control unit that attaches to an automobile’s carburetor. Sigma claims the ap- paratus will save the average car owner $100 per year in gasoline bills that should be worth over $800 (present value) to the owner using a discount rate of 10%. If the apparatus can save $100 per year, how many years would it have to be used for the present value of the savings to exceed $800?

Required: Prepare an analysis to answer each of the questions. lop5