A batch process runs on a zero-wait-time schedule. It has been determined that a 20% increase in capacity is possible if three equally sized storage tanks are purchased, and the processing schedule is altered appropriately. The cost of manufacture is $1.5 million/y with revenues of $2.75 million/y. The internal hurdle rate for process improvements is 20% p.a. over six years.

If each tank costs $1.7 million, do you recommend the investment?

What is the maximum cost per storage tank that will meet the profitability criterion and result in a 20% increase in capacity?

Suppose that storage tanks each cost $2.0 million but still result in a 20% increase in capacity. What is the DCFROR for the recommended process improvement?