Question 1: ABC Petrochemical is thinking of installing a computer process control system in one of its process plants. The plant is used about 40% of the time, or 3,500 operating hours per year, to produce a proprietary demulsification chemical. During the remaining 60% of the time, it is used to produce other specialty chemicals. Annual production of the demulsification chemical amounts to 30,000 kilograms, and it sells for $15 per kilogram. Annual production of the other speciality chemical amounts to 20,000 kilograms, and it sells for $05 per kilogram The proposed computer process control system will cost $1,000,000 and will have a salvage value of $50,000 and is expected to provide the following specific benefits in the production of the demulsification chemical: First, the selling price of the product could be increased by $3 per kilogram because the product Second, production volumes will increase by 5,000 kilograms per year as a result of higher Finally, the number of process operators can be reduced by one per shift, which represents a will be of higher purity, which translates into better demulsification. reaction yields, without any increase in the quantities of raw material or in production time. sav ings of $25 per hour. The new control system would result in additional maintenance costs of $55,000 per year and has an expected useful life of eight years. Also the system is likely to provide similar benefits in the production of the other specialty chemicals manufactured in the process plant, these benefits have summarized below. Other specialty chemical production volumes will increase by 2,000 kilograms per year as a result of higher reaction yields, without any increase in the quantities of raw material or in production time Finally, the number of process operators in other specialty chemicals can be reduced by one per shift, which represents a savings of $45 per hour Determine the net cash flows and calculate Payback period and Net present worth using interest rate of 20%