Consider these two alternatives for solid-waste removal.
Alternative A: Build a solid-waste processing facility. Financial variables are as follows:

Alternative B: Contract with vendors for solid-waste disposal after intermediate recovery. Financial variables are as follows:

Related Data:

a. How much more expensive (in terms of capital investment only) could Alternative B be in order to breakeven with Alternative A?
b. How sensitive is the after-tax PW of Alternative B to cotermination of both alternatives at the end of year 101
c. Is the initial decision to adopt Alternative B in Part (a) reversed if our company's annual operating expenses for Alternative B ($2.10 million per year) unexpectedly double? Explain why (or why not).

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Capital investment $108 million in 2008 (commercial operation starts in 2008) Expected life of facility Annual operating 20 years $3.46 million expenses Estimated market value 40% of initial capital cost at all times Capital investment $17 million in 2008 (This is for intermediate recovery from the solid-waste stream) Expected contract Annual operating Repair costs to 20 years $2.10 million $3.0 million period expenses intermediate recovery system every five years Annual fee to vendors Estimated market value $10.3 million $0 at all times MACRS (GDS) property class Study period Effective income tax rate Company MARR (after-tax) Inflation rate 15 yr (Chapter 7) 20 yr 40% 10% per year 0% (ignore inflation)