Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 17

A company is currently producing chemical compounds by a process that was installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the process, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with the process are $18,000. A sales representative from the U.S. Instrument Company is trying to sell a new chemical-compound-making process to the company. This new process will cost $200,000, have a service life of 10 years, a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming that the company desires a return of 12% on all investments, should it invest in the new process