Polytec Chemical, Inc. must decide between two additives to improve the dry-weather stability of its low- cost acrylic paint. Additive A will have an equipment and installation cost of $136,000 and an annual cost of $55,000. Additive B will have an installation cost of $175,000 and an annual cost of $31,000. If the company uses a five-year recovery period for paint products and an MARR of 30% per year, which process is favored on the basis of an incremental rate of return analysis? Also, determine the value of Ai*.

Polytec Chemical, Inc. must decide between two additives to improve the dry-weather stability of its low- cost acrylic paint. Additive A will have an equipment and installation cost of $136,000 and an annual cost of $55,000. Additive B will have an installation cost of $175,000 and an annual cost of $31,000. If the company uses a five-year recovery period for paint products and an MARR of 30% per year, which process is favored on the basis of an incremental rate of return analysis? Also, determine the value of Ai*.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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