A Large Textile Company Is Trying to Decide Among Three

Essay

A large textile company is trying to decide among three alternatives of sludge dewatering processes. The costs associated with these alternatives are shown below. Alternative Y will need an upgrade of $9700 at the end of year 2. At the end of year 2, alternative Z would be replaced with another alternative Z having the same installed and operating costs. If the MARR is 14% per year, which alternative should be chosen? $$\begin{array} { | l | l | l | l | } \hline \text { Alternative } & X & Y & Z \\\hline \text { Installed costs } & \$ 68,500 & \$ 48,500 & \$ 33,500 \\\hline \text { Annual operating costs } & \$ 6000 & \$ 4000 & \$ 5000 \\\hline \text { Overhaul cost in year 2 } &-& \$ 9700 & -\\\hline \text { Salvage value } & \$ 33,250 & \$ 28,250 & \$ 15,750 \\\hline \text { Useful life, years } & 8 & 4 & 2 \\\hline\end{array}$$