1) Mayvery, Inc., is considering design change that will cost $6,000 and will result in an annual savings of $1,000 per year for the 6 year life of the project. A cost of $2,000 will be avoided at the end of the project as a result of the change. MARR is 8%/year.

a. What is the annual worth of this investment?

b. What is the decision rule for judging the attractiveness of investments based on annual worth?

c. Should Mayvery implement the design change?

2)Final Finishing is considering three mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 10 years and no salvage value. Polisher 1 requires an initial investment of $20,000 and provides annual benefits of $4,465. Polisher 2 requires an initial investment of $10,000 and provides annual benefits of $1,770. Polisher 3 requires an initial investment of $15,000 and provides annual benefits of $3,580. MARR is 15%/year.

a. What is the annual worth of each polisher?

b. Which polisher should be recommended?

3)The overhead costs in a highly automated factories are expected to increase at an annual compound rate of 10% for the next 7 years. The overhead cost at the end of the first year is $200,000. What is the annual worth of the overhead costs for the 7-year period? The time value of money rate is 8%/year.

Also, calculate above question 6% for the interest rate.