Rolled ball screws are suitable for high-precision applications such as water je
ID: 2505776 • Letter: R
Question
Rolled ball screws are suitable for high-precision applications such as water jet cutting. Their total manufacturing cost is expected to decrease because of increased productivity, as shown in the table. Determine the equivalent annual cost at an interest rate of 8% per year.
Year
1
2
3
4
5
6
7
8
Cost, $1000
200
195
190
185
180
175
170
165
Year
1
2
3
4
5
6
7
8
Cost, $1000
200
195
190
185
180
175
170
165
Explanation / Answer
NPV = (200/1.08)+(195/1.08^2)+(190/1.08^3)+(185/1.08^4)+(180/1.08^5)+(175/1.08^6)+(170/1.08^7)+(165/1.08^8) = 1060.3
A = (1-(1.08)^-8)/.08 = 5.746
EAC = 1060.3/5.746 = $184.52