Question

USE EXCEL AND SHOW WORK PLEASE

An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. The treatment will cost ​$20,000 the first​ year, but process improvements will allow the costs to decline by ​$2,000 each year. As an​ alternative, an outside company will process the wastes for the fixed price of ​$10,000​/year throughout the 7 year​ period, payable at the beginning of each year. Either​ way, there is no need to treat the wastes after 7 years. Answer the following questions. (The​ company's MARR is 8​%)

1) How much is the AW of the inside option (the first option)?

2) How much is the AW of the outside option (the second option)?

3) Based on the information provided (and the AW method), which option is economically desirable for the company?

Answer 1