Book Description

Excerpt from Mfpg Product Durability and Life: Proceedings of the 27th Meeting of the Mechanical Failures Prevention Group, Held at the National Bureau of Standards, Gaithersburg, Maryland, November 1-3, 1977 The table reveals that as the time of the receipt of the benefit is pushed into the future, the discounted value of the benefit decreases. Additionally, the table shows that as the discount rate is increased, holding the benefit receipt period constant, the discounted value of the benefit decreases. For industrial decisions, the discount rate usually represents the minimum acceptable rate of return on corporate investments. It is usually determined by considering such factors as the cost of capital, project risk, expectations regarding inflation, etc. In many corporations this rate is varied, depending on the risk nature of the specific investment under consideration. It is significant to note that, currently, it is quite common place for the discount rate to be in excess of twenty per cent, with it not being uncommon for some corporations to use a discount rate of thirty percent for at least some of its investments. These rates have very serious ramifications from the viewpoint of at least one aspect of product durability, that is, extended product life. For, if the increase in product life has resulted in a one year extension of that life, say from nine years to ten years, it can be seen from Table 1 that each one dollar benefit in year ten, assuming a twenty percent discount rate, has a net present value of Alternately stated, this one year extension of product life can be justified only if each additional dollar of benefit cost no more than at inception. Of course, if the discount rate is increased to thirty percent, each additional dollar of benefit received in year ten can be justified by an additional expenditure of no more than at inception. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.