Q3) A reactor to be used for the oxidation of paraffin wax to make fatty acids is required. Two alternates are suggested: Reactor A made of ordinary steel costs $12,000 installed and has a life of about 2 years with a junk value of $200, whereas reactor B, made of steel but glass lined, costs $28,000 installed and has a life of 6 years with a salvage value of about $800 for fittings. Labor and other operating costs for both reactors are the same, but reactor A is expected to require about $400 for maintenance at the end of first year, whereas reactor B will require $100 maintenance at the end of second year and $300 at the end of fourth year. It is expected that the reactor B will give a slightly better yield and a better quality product. The value of these improvements is estimated at $400 per year. If money is worth 10 percent: (A) which installation shows the lower equivalent capital requirement at the present time? B) what are the comparative annual costs for the services rendered by the two alternates for 6 years' service? Hint: The names of the parameters used in the question are a little bit different than our textbook. That is somewhat common, different sources may use different ways of expressing the same concept. If you read to "understand the question, and watch out for the "key words" used for the asked quantities, you will understand what you are supposed to calculate.
Q3) A reactor to be used for the oxidation of paraffin wax to make fatty acids is required. Two alternates are suggested: Reactor A made of ordinary steel costs $12,000 installed and has a life of about 2 years with a junk value of $200, whereas reactor B, made of steel but glass lined, costs $28,000 installed and has a life of 6 years with a salvage value of about $800 for fittings. Labor and other operating costs for both reactors are the same, but reactor A is expected to require about $400 for maintenance at the end of first year, whereas reactor B will require $100 maintenance at the end of second year and $300 at the end of fourth year. It is expected that the reactor B will give a slightly better yield and a better quality product. The value of these improvements is estimated at $400 per year. If money is worth 10 percent:
(A) which installation shows the lower equivalent capital requirement at the present time?
B) what are the comparative annual costs for the services rendered by the two alternates for 6 years' service?
Hint: The names of the parameters used in the question are a little bit different than our textbook. That is somewhat common, different sources may use different ways of expressing the same concept. If you read to "understand the question, and watch out for the "key words" used for the asked quantities, you will understand what you are supposed to calculate.
Note: There is no inflation
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