An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 10-year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 10 years. Use the annual worth method to determine how the wastes should be processed. The company’s MARR is 10%. ( 6.2 )

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Answer 1

Textbook Question

Chapter 6, Problem 1P

An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 10-year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 10 years. Use the annual worth method to determine how the wastes should be processed. The company’s MARR is 10%. (6.2)

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

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Answer 2

Textbook Question

Chapter 6, Problem 1P

An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 10-year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 10 years. Use the annual worth method to determine how the wastes should be processed. The company’s MARR is 10%. (6.2)

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

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Answer 3

Textbook Question

Chapter 6, Problem 1P

An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 10-year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 10 years. Use the annual worth method to determine how the wastes should be processed. The company’s MARR is 10%. (6.2)

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

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Answer 4

Textbook Question

Chapter 6, Problem 1P

An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost $30,000 the first year, but process improvements will allow the costs to decline by $3,000 each year. As an alternative, an outside company will process the wastes for the fixed price of $15,000/year throughout the 10-year period, payable at the beginning of each year. Either way, there is no need to treat the wastes after 10 years. Use the annual worth method to determine how the wastes should be processed. The company’s MARR is 10%. (6.2)

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

Answer 8

Expert Solution & Answer

To determine

Calculate the annual worth.

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Calculate the annual worth.

Answer 12

Explanation of Solution

Time period is denoted by n and the interest is denoted by i. Annual worth (AWA) of A can be calculated as follows.

AWA=−CostFirst year+Decreasing cost(1i−n(1+i)n)=−30,000+3,000(10.1−10(1+0.1)n)=−18,824

Annual worth is -$16,500.

Annual worth (AWB) of B can be calculated as follows.

AWB=−Fixed price(1(1+i)10)=−15,000(1(1+0.1)10)=−16,500

Annual worth is -$16,500. Since the present worth of the cost is lower for option B, select the option B.

Answer 13

Ch. 6 - An oil refinery finds that it is necessary to...Ch. 6 - The Consolidated Oil Company must install...Ch. 6 - One of the mutually exclusive alternatives below...Ch. 6 - Three mutually exclusive design alternatives are...Ch. 6 - Prob. 5P Ch. 6 - Prob. 6P Ch. 6 - Fiesta Foundry is considering a new furnace that...Ch. 6 - Prob. 8P Ch. 6 - DuPont claims that its synthetic composites will...Ch. 6 - Prob. 10P

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