Question
A large textile company is trying to decide among three alternatives of sludge dewatering processes. The costs associated with these alternatives are shown below. Alternative
A large textile company is trying to decide among three alternatives of sludge dewatering processes. The costs associated with these alternatives are shown below. Alternative Y will need an upgrade of $9700 at the end of year 2. At the end of year 2, alternative Z would be replaced with another alternative Z having the same installed and operating costs. If the MARR is 14% per year, which alternative should be chosen?
Alternative | X | Y | Z |
Installed costs | $68,500 | $48,500 | $33,500 |
Annual operating costs | $6000 | $4000 | $5000 |
Overhaul cost in year 2 | - | $9700 | - |
Salvage value | $33,250 | $28,250 | $15,750 |
Useful life, years | 8 | 4 | 2 |
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