A company that manufactures clear PVC pipe isinvestigating

Chapter 18, Problem 18.13

(choose chapter or problem)

A company that manufactures clear PVC pipe isinvestigating the production options of batch andcontinuous processing. Estimated cash flows are:Process Batch ContinuousFirst cost, $ 80,000 140,000Annual cost, $ per year 52,000 31,000Salvage value, any year, $ 10,000 25,000Life, years 310 5 The chief operating officer (COO) has asked you todetermine if the batch option would ever have alower annual worth than the continuous flow systemusing an interest rate of 15% per year. Thecontinuous flow process was previously determinedto have its lowest cost over a 5-year lifecycle, but the batch process can be used from 3 to10 years. If selecting the batch process is sensitiveto its useful life, what is the minimum life thatmakes it more attractive? Solve (a) by hand, and(b) by spreadsheet to install and $5000 annually to maintain over its expectedlife of 5 years. Added revenue is estimated toaverage $60,000 per year. Examine the sensitivity ofpresent worth at a MARR of 10% per year to variationin selected parameter estimates, while others remainconstant.