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Unformatted text preview: Doublecheck: PW(15%) for the new baghouse = -$1,719,671 PW(15%) for the new ESP = -$1,359,876 The economic advantage of the ESP may not be sufficient enough to overcome is inability to meet certain design specifications under varying operating conditions. 6.26) Rank alternatives by increasing capital investment: A,B,C,D and E. Since the ERR on Equipment A > MARR, it is an acceptable base alternative. Therefore, ERRon Δ (B−A) must be examined. Δ (B−A) ($50,000 − $38,000)(F/P, i′, 10) = ($14,100 − $11,000)(F/A, 18%, 10) i′= 19.8% > MARR, therefore select B. Δ (C−B) $5,000 (F/P, i′, 10) = $2,200(F/A, 18%, 10) i′= 26.3% > MARR, therefore select C. Δ (D−C) $5,000 (F/P, i′, 10) = $500(F/A, 18%, 10) i′= 8.9% < MARR, therefore keep C. Δ (E−C) $15,000 (F/P, i′, 10) = $2,900(F/A, 18%, 10) i′= 16.4% < MARR, therefore keep C as best. Answer: Select C....
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- Spring '12
- Finance, Internal rate of return, The Extra, Alternative, Alternative rock