The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment are being considered:

The company can obtain a 15% annual return on its' investment in other projects and is willing to invest money on the processing equipment only as long as_ it can obtain 15% annual return on each increment of money invested. Which one, if any, of the alternatives should be selected? Use a rate of return analysis.

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B Initial investment $25,000 $30,000 9,000 4,000 $10,000 $18,000 Annual saving in materials costs 6,000 4,000 7,500 Annual operating cost 2,000 3,000 3,000