A firm is evaluating two competing projects. The first is a new ("grass roots") inorganic chemicals plant, while the second is the expansion of a textile fibers facility. The process engineers have estimated the projected annual revenue, total capital investment, and total annual cost (without capital recovery) for each project, as follows: Complete calculation for the fiber plant. Which project is the better investment? Some calcs in the book are inaccurate ..

Consider a plant manager's $10,000 investment in a control device that has a 3-yr lifetime. Carry out the discounted cash flow calculation for this new unit assuming that the investment returns $5,000/yr for 3yr, and that the investment has $0 salvage value at the end of the 3-yr period.

Three different control devices are available for the removal of a toxic contaminant from a stream. The service life is 10 years for each device. Their capital and annual operating costs are as follows:

Device Initial Cost Annual Operating Cost Salvage Value in Year 10

A $300,000 $50,000 0

B $400,000 $35,000 0

C $450,000 $25,000 0

Which is the most economical unit?

Employ a straight-line depreciation method of analysis.