Question

The cash flows in the table below represent the potential annual savings associated with two different types of production  processes, each of which requires an investment of ​$41,000. Assume an interest rate of 6​%.

n   Process A   Process B
0   -$41,000   -$41,000
1   $19,730   $17,850
2   $16,950   $17,850
3   $14,170   $17,850
4   $11,390   $17,850

a) The equivalent annual savings for process A are  

b) The equivalent annual savings for process B are  

c) Determine the hourly savings for each process, assuming 2000 hours of operation per year.

d) Which process should be selected

Answer 1

The answer is given in the picture.