Veri-Trol, Inc. manufactures in-situ calibration verification systems that confirm flow measurement accuracies without removing the meters. The company is considering modifying the main assembly line with one of the enhancements shown below. If the company’s real MARR is 15% per year, which process has the lower annual cost?

Include an inflation rate of 5% per year in the analysis?

Process X Process Y First cost, $ 65,000 90,000 Operating cost, $ per year 40,000 34,000 Salvage value, $ 0 10,000 Life, years 5 5