Bailey, Inc., is considering buying a new gang punch that would allow them to produce circuit boards moreef? ciently. Thepunch hasa?rstcostof$100,000 andausefullife of15 years. Atthe endofits usefullife,the punchhasnosalvage value. Annuallaborcosts wouldincrease $2,000 usingthe gangpunch, butannualrawmaterial costswould decrease $12,000. MARR is 5 percent/year.
a. What is the present worth of this investment?
b. What is the decision rule for judging the attractiveness of investments based on present worth?
c. Should Bailey buy the gang punch?