A New Technological Line to Produce Shoes Is Being Designed

question 19

Essay

A new technological line to produce shoes is being designed. It costs $100 000 and operating costs are expected to be $30 000 per year. Planned annual production is 800 pairs and the price of a pair of shoes is $80. The line's service life is five years, the depreciation rate is 20%. Assuming a 10% annual interest rate for the base case, perform a sensitivity analysis with respect to the interest rate in the interval [-20%, +20%] in terms of present worth. Comment on your results briefly.

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Definitions:

Solution

The value or set of values that satisfies a given mathematical equation or inequality.

Inequality

A mathematical sentence indicating that two expressions are not equal, using symbols such as <, >, ≤, or ≥.

Solve

The process of finding the value(s) of variable(s) that satisfy an equation, inequality, or system of equations.