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Just need the answer answer to compare Chrysler is considering a cost reduction program. The suppliers must reduce the cost of the components that they
Just need the answer answer to compare
Chrysler is considering a cost reduction program. The suppliers must reduce the cost of the components that they furnish to Chrysler by 5% each year. (The total amount of savings would increase each year.) The initial costs: Program Setup: $12,500,000 . Feasibility Study (completed six months ago): 1,500,000 Supplier Training: 7,500,000 Chrysler is currently paying a total of $85,000,000 per year for components purchased from the vendors who will be involved in this program. (Assume that, if the program is not approved, the annual cost of purchased components will remain constant at $85,000,000 per year.) The program has been designed as a five-year initiative, and Chrysler's MARR for such projects is 12% (im). There will be annual operating expenses associated with the program for further training of vendors, updating internal documentation, and so on. Given the projected savings in purchased components, what would be the maximum annual operating expense for this program such that it is marginally justified? Assume that the EOY 1 cost for purchased components is $85,000,000. 5 Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. The PW if the program is approved is $ million. (Round to one decimal place.) The PW if the program is not approved is $ million. (Round to one decimal place.) The maximum annual operating expense for this program is $ million. (Round to two decimal places.) Enter your answer in each of the answer boxesStep by Step Solution
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