N2

Your company is purchasing a new widget separator. Two alternatives

outlined below.

Initial cost

Alt X

Alt. Y

Annual O&M cost Salvage value

$90,000 $60,000

7.500

9,000

Overhaul (Year 6) Life (years)

20,000 10

5,000 Not required

If the firm's interest rate is 7%, which separator should be purchased? What are the savings over the other option? Use present worth analysis.

are being considered, as