Question

The cash flows in the table below represent the potential annual savings associated with two different types of production​ processes, each of which requires an investment of ​$38,000. Assume an interest rate of 9​%.

n   Process A   Process B
0   -$38,000 -$38,000
1   $17,510 $17,150
2   $15,750 $17,150
3   $13,990 $17,150
4   $12,230 $17,150

​(a) Determine the equivalent annual savings for each process.

The equivalent annual savings for process A are $_____

​(Round to the nearest​ dollar.)

Answer 1

The equivalent annual savings for process A are $3,330

The equivalent annual savings for process B are $5,421

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