United Fruits now offers volume discounts by

Chapter 3, Problem 3.46

(choose chapter or problem)

United Fruits now offers volume discounts by the10-kilogram (10-kilo) pack to small, as well aslarge, supermarket chains for organically grownin-season fruit shipped directly from the orchard.Over the last 8 years, the food market chain CoopForAllhas purchased the number of 10-kilo packsshown below when United Fruits has Californiafree-stone peaches in season. Through a special arrangement,the price per 10-kilo pack has remainedconstant at $15.00 per pack. United Fruits willnow charge CoopForAll according to the volumediscount schedule shown. The no-discount pricethis year is $19.95 per 10-kilo pack. Based on the progressive discounts of 10% morefor increased-size orders, if CoopForAll buys thesame amount as last year, the total cost with discountswill be: 2000 packs $19.95[1 (3 0.10)] = 2000 13.97 = $27,940. This is less than$30,000, the cost for 2000 packs at the flat rate of$15.00 per pack.Calculate the equivalent worth now of the annualcosts for the 8 years of prior purchases at theflat rate of (a) $15.00 per pack, and (b) the cost hadthey been purchased using the discount schedule.Let i = 8% per year. (Hint: This is a future worthvalue now at the end of year 1.)