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16 Helical Systems, Inc. uses a minimum attractive rate of return of 8% per year, compounded annually. The company is evaluating two new processes for
16 Helical Systems, Inc. uses a minimum attractive rate of return of 8% per year, compounded annually. The company is evaluating two new processes for improving the efficiency of its manufacturing operation. The cash flow estimates associated with each process are shown below. A correct equation to use for an incremental rate of return analysis is (2) (2 ) First cost, s Annual cost. S per year Salvage value, s Life, years Process - 40,000 - 15.000 5,000 3 Process -50,000 - 12.000 6.000 3 PIA, Ai*,3)+)3000 + 10,000- = 0 (1000(P/F,Ai*,3 O P/A,Ai*,3) +)3000 - 10,000- = 0 (1000(P/F, Ai*,3 A/P, Ai*,3) - 15,000)40,000- = 0 (+ 5000(A/F.Ai* 3 O At the interest rate of 10% per year, an alternative with the following estimates has a modified B/C ratio that is closest to Benefits of $60,000 per year Disbenefits of $29,000 per year Amortized first cost of $10,000 per year M&O costs of $15,000 per year (2 ) 0.65 None of the answers O 0.80 O 0.72
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