3. Your boss has suggested that, instead of a savings of $37,000 annually, it makes more sense to expect a savings that starts at $20,000 in year 3 and rises $2,000 per year to an ending value in year 13 of $40,000. She bases her suggestion on the fact that the experience curve will gradually reduce production costs. What would be the NPV of the cash flow at 4% if you adopt her suggestion?

3. Your boss has suggested that, instead of a savings of $37,000 annually, it makes more sense to expect a savings that starts at $20,000 in year 3 and rises $2,000 per year to an ending value in year 13 of $40,000. She bases her suggestion on the fact that the experience curve will gradually reduce production costs. What would be the NPV of the cash flow at 4% if you adopt her suggestion?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 12P

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