The cost of improving office layout is 27,000 to be treated as a one time expense. the office manager says that the new layout will save time and miles of walking for the 40 office employees. she estimates that the new layout will cut the amount of walking for the average employee by 100 miles per year. how much will the layout improvements be worth?

assume that the average walking speed of an employee is 3 mph, then 100 mile a year translates to 33.3 hrs per year, assume that average hourly rate for an employee is 30$, that translate to 1000$/year for an employee and total of 1000*40 = 40000$/year. Assume that the require return for the investment is 10%, and the present value for the cash saving is 40000*1/0.1 = 400,000$, the worth of the improvement is thus

400,000-27,000 = 373, 000$

Mar 29th, 2015

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