Problem:
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 $60,000 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 $2,500 using the gang punch, but annual raw material costs would decrease $14,000. MARR is 4.0 %/year.
Requirement:
Question 1: What is the present worth of this investment?
Question 2: What is the decision rule for judging the attractiveness of investments based on present worth?
Question 3: Should Bailey buy the gang punch? Please present complete computation and also provide full description.