Amazon is considering purchasing a sophisticated computer system to "cube" a book's dimensions: measure its height, length, and width so that the proper box size will be used for shipment

Economics Dec 02, 2020

Amazon is considering purchasing a sophisticated computer system to "cube" a book's dimensions: measure its height, length, and width so that the proper box size will be used for shipment. This will save packing material, cardboard, and labor. If the savings will be $140,000 the first year, $150,000 the second year, and amounts increasing by $11,000 each year for 8 years, what is the present worth of the system at an interest rate of 14% per year?

Expert Solution

Present worth = 140000(P/F, 14%, 1) + (150000(P/A, 14%, 7) + 11000(P/G, 14%, 7))(P/F, 14%, 1)

= 140000*0.877193 + (150000*4.288305 + 11000*10.648883)*0.877193

= 789810

This is the required PW

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