A process for the fabrication of microelectronic components has been designed. The required before-tax return on investment is 18% p.a., and the equipment life is assumed to be eight years.

Do you recommend construction of the base-case process?

Do you recommend including either of the process alternatives?

Suppose there were another alternative, compatible with either of the previous alternatives, requiring an additional $3.26 million capital investment. What savings in operating cost would be required to make this alternative economically attractive?

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Capital Investment ($million) Additional Investment ($million) Base-Case Design Alternative 1 Alternative 2 21 Product Revenue ($million/y) 12 Raw Material Costs (Smillion/y) 5.1 Other Operating Costs (Smillion/y)0.35 2.15 12 5.1 0.27 1.35 12 5.1 0.31