6-23. Environmentally conscious companies are looking for ways to be less damaging to the environment while saving money with innovative investments in capital equipment. DuPont is sponsoring a project to recover much of the energy presently being lost in the primary stage of one of their chemical reactor vessels.

Three mutually exclusive designs are being considered for implementation. The estimated capital requirements and annual savings in operating expenses are given below.

Assume aMARR = 15% per year, and the study period is 6 years. Salvage values of the three designs are negligible.

Which design should be selected? (6.4)

EOY ER1 ER2 ER3 0 −$110,000 −$115,000 −$81,200 1–6 $25,800 $29,000 $19,750 in year 1, in year 1, per year growing at growing by 6% per year $250 per year