A paper mill is considering two types of pollution control equipment.
Neutralization -
Initial Cost: $700,000
Annual Chemical Cost: 40,000
Salvage Value: 175,000
Useful Life, in years: 5
Precipitation -
Initial Cost: $500,000
Annual Chemical Cost: 110,000
Salvage Value: 125,000
Useful Life, in years: 5
a.) Construct a choice table for interest rates from 0% to 100%.
b.) The firm wants a 12% rate of return on any avoidable increments of investment. Which equipment should be purchased?