A company that manufactures clear PVC pipes is investigating the production options of batch and continuous processing. Estimatedcash flows are:BatchProcessFirst cost ($)Annual cost ($ per year)Salvage value, any year,Continuous-69,000-48,000-140,000-31,00020,00025,000Life (years)3-10The chief operating officer (COO) has asked you to determine if the batch option, using an interest rate of 15% per year, would everhave an annual worth lower than that of the continuous flow system. The continuous flow process was previously determined to haveIts lowest cost over a 5-year life cycle, but the batch process can be used from 3 to 10 years. If selecting the batch process is sensitiveto its useful life, what is the minimum life that makes It more attractive?The batch system will be less expensive than the continuous flow if it lasts overyears.

We are going to find the present worth for both the options to answer this question.

Acompany that manufactures clear PVC pipes is investigating the production options of batch and continuous processing Estimoted cash flows are: Process First cost ($) Annual cost (S per year) Salvage value, any year, $) Life (years) Batch -69,000 -48,000 Continuous 140,000 -31,000 20,000 25,000 3-10 5. The chief operating officer (COO) has asked you to determine if the batch option, using an interest rate of 15% per year, would ever eve en annual worth lower than that of the continuous flow system. The continuous flow process was previously determined to have s lowest cost over a 5-year life cycle, but the batch process can be used from 3 to 10 years. If selecting the batch process is sensitive o its useful life, what is the minimum life that makes it more attractive? The batch system will be less expensive than the continuous flow if it lasts over years.

Acompany that manufactures clear PVC pipes is investigating the production options of batch and continuous processing Estimoted cash flows are: Process First cost ($) Annual cost (S per year) Salvage value, any year, $) Life (years) Batch -69,000 -48,000 Continuous 140,000 -31,000 20,000 25,000 3-10 5. The chief operating officer (COO) has asked you to determine if the batch option, using an interest rate of 15% per year, would ever eve en annual worth lower than that of the continuous flow system. The continuous flow process was previously determined to have s lowest cost over a 5-year life cycle, but the batch process can be used from 3 to 10 years. If selecting the batch process is sensitive o its useful life, what is the minimum life that makes it more attractive? The batch system will be less expensive than the continuous flow if it lasts over years.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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