Question

Please answer all parts and show all work

7. A firm is considering replacing an existing distillation column for separating benzene and toluene. One column uses traditional trays to separate the components, while the other uses a vertical packing with a small pore space. The cash flows associated with each of these options is listed below. If the MARR for the company is 8%, which column do you recommend? (You may use any of the methods in Chapters 5-8) First Cost Annual Benefits Salvage Value Annual Maintenance Costs Estimated life, in years Packed Column $787,100 $78,000 $99,000 $4,000 Tray Column $684,220 $70,000 $40,000 $2,000 45 34

Answer 1

Since useful lives are different, AW method is used.

AW, Packed = - 787,100 x A/P(8%, 45) + (78,000 - 4,000) + 99,000 x P/F(8%, 45) x A/P(8%, 45)

= - 787,100 x 0.0826 + 74,000 + 99,000 x 0.0313 x 0.0826

= - 65,014 + 74,000 + 256

= 9,242

AW, Tray = - 684,220 x A/P(8%, 34) + (70,000 - 2,000) + 40,000 x P/F(8%, 34) x A/P(8%, 34)

= - 684,220 x 0.0863 + 68,000 + 40,000 x 0.0730 x 0.0863

= - 59,048 + 68,000 + 252

= 9,204

Since Packed has higher AW, this is best option.