A metal plating company is considering four differ­ent methods for recovering by-product heavy met­als from a manufacturing site’s liquid waste. The investment costs and annual net incomes associated with each method have been estimated. All meth­ods have an 8-year life; the MARR is 11% per year; and an AW-based ROR analysis is required. (a) If the methods are independent (because they can be implemented at different plants), which ones are acceptable? (b) If the methods are mutually exclu­sive, determine which one should be selected.

Question

Answer 1

(a) A vs DN: 0 = -30,000(A/P,i*,8) + 4000 + 1000(A/F,i*,8)
Solve for i* by trial and error or spreadsheet
i* = 2.1% (spreadsheet)
Method A is not acceptable

B vs DN: 0 = - 36,000(A/P,i*,8) + 5000 + 2000(A/F,i*,8)
i* = 3.4%
Method B is not acceptable

C vs DN: 0 = - 41,000(A/P,i*,8) + 8000 + 500(A/F,i*,8)
i* = 11.3%

Method C is acceptable

D vs DN: 0 = - 53,000(A/P,i*,8) + 10,500 - 2000(A/F,i*,8)
i* = 11.1%
Method D is acceptable

(b) Revenue alternatives; compare to DN initially

A vs DN: 0 = -30,000(A/P,i*,8) + 4000 + 1000(A/F,i*,8)
Solve for i* by trial and error or spreadsheet
i* = 2.1% (spreadsheet)
Eliminate A; retain DN

B vs DN: 0 = - 36,000(A/P,i*,8) + 5000 + 2000(A/F,i*,8)
i* = 3.4%
Eliminate B; retain DN

C vs DN: 0 = - 41,000(A/P,i*,8) + 8000 + 500(A/F,i*,8)
i* = 11.3%
Eliminate DN; retain C

D vs DN: 0 = - 53,000(A/P,i*,8) + 10,500 - 2000(A/F,i*,8)
i* = 11.1%
Eliminate DN; retain D
D vs C: 0 = - 12,000(A/P,?i*,8) + 2,500 - 2500(A/F,?i*,8)
?i* = 10.4%
Eliminate D

Select method C