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dont use excel
5.14 Tivo processes can be used for producing a polyuner that reduces friction loss in en. gines. Process K will have a first
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Answer #1

i = 8% / 4 = 2% per quarter

NPW analysis will be carried for 4 yrs or 16 quarters (LCM to 2 & 4)

NPW of Process K = -160000 - 7000 * (P/A,2%,16) - (160000 - 40000)*(P/F,2%,8) + 40000 * (P/F,2%,16)

= -160000 - 7000 *13.577709 - 120000*0.853490 + 40000*0.728446

= -328324.92 ~ -328325 (Nearest Dollar)

NPW of Process L = -210000 - 5000 * (P/A,2%,16) + 26000 * (P/F,2%,16)

= -210000 - 5000 *13.577709 + 26000*0.728446

= -258948.95 ~ -258949 (Nearest Dollar)

As present cost of Process L is less, it should be selected

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