Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 17

An automobile company is investigating the advisability of converting a plant that manufactures economy cars into one that will make retro sports cars. The initial cost for equipment conversion will be $200 million with a 20% salvage value anytime within a 5-year period. The cost of producing a car will be $21,000, but it is expected to have a selling price of $33,000 to dealers. The production capacity for the first year will be 4000 units. At an interest rate of 12% per year, by what uniform amount will production have to increase each year in order for the company to recover its investment in 3 years