Sensotech, Inc., a maker of microelectromechanical systems, believes it can reduce product recalls by 10% if it purchases new software for detectingfaulty parts at a cost of $225,000. The minimum attractive rate of return is 15% per year.a. How much does the company have to save each year for 4 years to recover its investment?b. What was the cost of recalls per year before the software was purchased if the company exactly recovered its investment in 4 years from the 10% reduction?
Sensotech, Inc., a maker of microelectromechanical systems, believes it can reduce product recalls by 10% if it purchases new software for detectingfaulty parts at a cost of $225,000. The minimum attractive rate of return is 15% per year.a. How much does the company have to save each year for 4 years to recover its investment?b. What was the cost of recalls per year before the software was purchased if the company exactly recovered its investment in 4 years from the 10% reduction?
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
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Sensotech, Inc., a maker of microelectromechanical systems, believes it can reduce product recalls by 10% if it purchases new software for detecting
faulty parts at a cost of $225,000. The minimum attractive rate of return is 15% per year.
a. How much does the company have to save each year for 4 years to recover its investment?
b. What was the cost of recalls per year before the software was purchased if the company exactly recovered its investment in 4 years from the 10% reduction?
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