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 for the base case, perform a sensitivity analysis with respect to the interest rate in the interval [-20%, +20%] in terms of present worth. Comment on your results briefly.

Question

Quizplus · Accepted Answer

The Answer of 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 for the base case, perform a sensitivity analysis with respect to the interest rate in the interval [-20%, +20%] in terms of present worth. Comment on your results briefly.

A New Technological Line to Produce Shoes Is Being Designed