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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 $70,000, 6 years from now, how much could the company afford to spend now (instead of 6 years from now) at a minimum attractive rate of return of 14% per year?

Respuesta :

Cricetus

Answer:

The right solution is "31892.12".

Explanation:

The given values are:

Future value,

FV = $70,000

rate of return,

r = 14%

Time,

T = 6

Now,

The company afford to spend,

= [tex]\frac{FV}{(1+r)^T}[/tex]

On putting the given values, we get

= [tex]\frac{70000}{(1+14 \ percent)^6}[/tex]

= [tex]\frac{70000}{(1+0.14)^6}[/tex]

= [tex]\frac{70000}{(1.14)^6}[/tex]

= [tex]\frac{70000}{2.1949}[/tex]

= [tex]31892.12[/tex]

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