Question

4. A battery manufacturing plant has been ordered to cease discharging acidic waste liquids containing mercury into the city sewer system. As a result, the firm must now adjust the pH and remove the mercury from its waste liquids. Two firms have provided quotations on the necessary equipment. An analysis of the quotations provided the following table of costs. Annual Income from Mercury Recovery $4,000 1,200 Salvage Value Annual maintenance Cost Installed Cost Bidder $20,000 $100,000 60,000 $9,000 6,000 Foxhill Instrument Quicksilver If the installation can be expected to last 10 years and MARR is 6%, which equipment should be purchased based on Present worth Analysis? (15 points)

Answer 1

PW, Foxhill = - 100,000 + (4,000 - 9,000) x P/A(6%, 10) + 20,000 x P/F(6%, 10)

= - 100,000 - 5,000 x 7.3601 + 20,000 x 0.5584

= - 100,000 - 36,800.5 + 11,168

= - 125,632.5

PW, Quicksilver = - 60,000 + (1,200 - 6,000) x P/A(6%, 10)

= - 60,000 - 4,800 x 7.3601

= - 60,000 - 35,328.48

= - 95,328.48

Since Quicksilver has lower negative PW, this should be selected.