Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $62,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $3,500 using the gang punch, but annual raw material costs would decrease $7,000. MARR is 4.75 %/year.

1.What is the present worth of this investment?

2.What is the decision rule for judging the attractiveness of investments based on present worth?

3.Should Bailey buy the gang punch?