A maker of micromechanical systems can reduce product recalls by 10% with the installation of new packaging equipment. If the cost of the new equipment is expected to be $40,000 four years from now, how much could the company afford to spend now (instead of 4 years from now) at a minimum attractive rate of return of 12% per year?
What will be an ideal response?
P = 40,000(P/F,12%,4)
= 40,000(0.6355)
= $25,420
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