Question

H2.3 = A large refinery and petrochemical complex is planning to manufacture caustic soda, which will use 10,000 gallons of f

use x= SR8000
include cash flow diagram

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Answer #1

NPW of option 1 = -164000

NPW of option 2 = -(120000+8000) - 12000 - (12000 - 1000)*(P/F,12%,20) + 1000*(P/F,12%,40) - 1000*(P/A,12%,40)

= -(120000+8000) - 12000 - (12000 - 1000)*0.103667 + 1000*0.010747 - 1000*8.243777

= -149373.37

As Present cost of option 2 is less, it should be selected

CFD of option 1

0.00 0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940 -20,000.00 -40,000.00 -60,000.00 -80,

CFD of option 2

20,000.00 0.00 1 2 3 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -

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