Company to reduce energy losses in the equipment

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Reference no: EM131980979

There are two manufacturing processes that can be utilized by a company to reduce energy losses in the equipment. We have the following cost information available:

Initial cost | Process A: $180,000 Process B: $240,000

Operations and Management cost | Process A: $7,000 quarterly, Process B: $5,000 quarterly

Useful life | Process A: 3 years, Process B: 4 years

Residual value at the end of the useful life | Process A: $30,000 Process B: $42,000

Determine which process should be selected using the following analysis models:

a. Present value with an annual interest rate of 12% calculated quarterly.

b. Equivalent uniform quarterly value with an annual interest rate of 12% calculated quarterly.

c. Capitalized cost with an annual interest rate of 16% calculated quarterly.

Reference no: EM131980979

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