Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards more efficiently. The punch has a first cost of $100,000 and a useful life of 15 years. At the end of its useful life, the punch has no salvage value. Annual labor costs would increase $2,000 using the gang punch, but annual raw material costs would decrease $12,000. MARR is 5 percent/year.
a. What is the future worth of this investment?
b. What is the decision rule for judging the attractiveness of investments based on future worth?
c. Should Bailey buy the gang punch?