An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging…

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An oil refinery finds that it is necessary to treat the waste liquids from a new process before discharging them into a stream. In-house treatment will

have an annual cost of $50,000 the first year, but process improvements will allow the annual cost to decline by $5,000 each subsequent year. As

an alternative, an outside company will process the wastes for an initial cost of $17,400 and an annual fixed price of $15,400/year throughout the

15 year period. Either way, there is no need to treat the wastes after 15 years. Using the AW method, calculate the equivalent uniform annual

cost (EUAC) of each alternative and determine how the waste should be processed. The company’s MARR is 8%.

The EUAC for in-house treatment is $. (Round to the nearest dollar as positive cash flow.)

The EUAC for outside treatment is $

(Round to the nearest dollar as positive cash flow.)

The most economical alternative is

A. outside treatment

B. in-house treatment

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SOLUTION To calculate the equivalent uniform annual cost EUAC of each alternative we need to determi

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