Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 35

Two processes can be used for producing a polymer that reduces friction loss in engines. Process K, which is currently in place, has a market value of $165,000 now, an operating cost of $69,000 per year, and a salvage value of $50,000 after 1 more year and $40,000 after its maximum 2-year remaining life. Process L, the challenger, will have a first cost of $230,000, an operating cost of $65,000 per year, and salvage values of $100,000 after 1 year, $70,000 after 2 years, $45,000 after 3 years, and $26,000 after its maximum expected 4-year life. The company's MARR is 12% per year. You have been asked to determine which process to select when
a) a 2-year study period is used and b) a 3-year study period is used.