A company is trying to decide which of two new product lines to introduce in the coming year. The company requires a 12% return on investment. The predicted revenue and cost data for each product line follows:
The company has a 30% tax rate and it uses the straight-line depreciation method. The present value of an annuity of 1 for 5 years at 12% is 3.6048. Compute the net present value for each piece of equipment under each of the two product lines. Which, if either of these two investments is acceptable?
Definitions:
Cognitive Psychologist
A professional in psychology who studies mental processes including perception, memory, thought, and problem-solving.
Aversion
A strong dislike or disinclination towards something, often used in psychological contexts to describe responses to unpleasant stimuli.
Ergonomic Principle
Refers to design considerations that maximize productivity by minimizing operator fatigue and discomfort.
Unfamiliar
Not known or recognized previously, often causing uncertainty or a lack of comfort.
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