A continuous improvement team has helped to save $20,000 for the company on a process that will not be changed for the next 10 years. If the team has spent $50,000 on the improvement project, the net present worth (NPW) of savings on this improvement project is $150,000 at a MARR of 5%.

Question

Quizplus · Accepted Answer

The net present worth (NPW) calculation should consider the time value of money. The $20,000 savings per year for 10 years must be discounted at the MARR of 5% and then compared to the $50,000 cost. The NPW is not $150,000.

A Continuous Improvement Team Has Helped to Save $20,000 for the Company