A solid-waste recycling plant is considering two types of storage bins using an MARR of 10% per year. (a) Use ROR evaluation to determine which should be selected. (b) Confirm the selection using the regular AW method at MARR = 10% per year.
What will be an ideal response?
(a) 0 = -17,000 + 400(P/A,?i*,6) + 17,000(P/F,?i*,3) + 1700(P/F,?i*,6)
Solve for ?i* by trial and error or spreadsheet
?i* = 6.84% < MARR = 10%
Select alternative P
(b) AW P = -18,000(A/P,10%,3) - 4000 + 1000(A/F,10%,3)
= -18,000(0.40211) - 4000 + 1000(0.30211)
= $-10,936
AW Q = -35000(A/P,10%,6) – 3600 + 2700(A/F,10%,6)
= -35,000(0.22961) – 3600 + 2700(0.12961)
= $-11,286
Select P, though neither option makes MARR = 10%
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