Equipment needed at a Valero Corporation refinery for the conversion of corn stock to ethanol, a cleaner- burning gasoline additive, will cost $175,000 and have net cash flows of $35,000 the first year, increasing by $10,000 per year over the life of 5 years.
(a) Determine the AW amounts at different MARR values to determine when the project switches from financially justified to unjustified. (Hint: Start at 12% per year and increase by 1% per year.)
(b) If a spreadsheet is used, plot a graph of AW versus interest rate on the spreadsheet.