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You are the lead engineer evaluating a possible design change on a pod style coffee maker...

You are the lead engineer evaluating a possible design change on a pod style coffee maker your company produces. Your analysis indicates the redesign could make profits of $55,000 for the first year and then decrease by 4.25% annually. You will manufacture and sell this coffee maker for 5 years. Your company would need to invest money now to develop this design change and will withdraw money from an account paying 7% APR compounded annually to cover these costs. What is the maximum amount your company should be willing to invest to develop the possible design change?
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Answer #1

Solution :-

To find maximum investment we need to find Present value of Future Cash Inflows of the Project

Therefore Present Value of Benefits = $208,355.09

Therefore , the maximum amount that company should willing to invest to develop the possible design change = $208,355.09

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