Silastic-LC-50 is a liquid silicon rubber designed to provide excellent clarity, superior mechanical properties, and short cycle time for high speed manufacturers. One high-volume manufacturer used it to achieve smooth release from molds. The company’s projected growth will result in silicon costs of $26,000 in years 1 and 2, with costs increasing by $2000 per year in years 3 through 5. At an interest rate of 10% per year, what is the present worth of these costs?

Question

What will be an ideal response?

Answer 1

P = 26,000(P/F,10%.1) + [26,000(P/A,10%,4) + 2000(P/G,10%,4)](P/F,10%,1)
= 26,000(0.9091) + [26,000(3.1699) + 2000(4.3781)](0.9091)
= $106,522