n oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 12 year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 12 years. Use the annual worth method to determine how the wastes should be processed. The company's MARR is 5%. a) The AW of the in-house treatment is $ ? b) The AW of the outside treatment is $ ? c) The ? processing is the most economical alternative.
n oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 12 year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 12 years. Use the annual worth method to determine how the wastes should be processed. The company's MARR is 5%. a) The AW of the in-house treatment is $ ? b) The AW of the outside treatment is $ ? c) The ? processing is the most economical alternative.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 12 year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 12 years. Use the annual worth method to determine how the wastes should be processed. The company's MARR is 5%.
a) The AW of the in-house treatment is $ ?
b) The AW of the outside treatment is $ ?
c) The ? processing is the most economical alternative.
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