A new technological line to produce shoes is being designed


Question: 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, perform sensitivity analysis with respect to the operating costs in the interval [-20%, +20%) in terms of the present worth and plot sensitivity graph. Calculate the slope of the sensitivity graph and comment briefly.

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