The installation of a new heat exchanger is proposed for the batch crystallization step in an existing pharmaceutical manufacturing process. The heat exchanger costs $49,600 (installed) and saves $8000/y in operating costs. Is this a good investment based on a before-tax analysis?

Data:

Internal hurdle rate = 12% p.a. (after tax)

Taxation rate = 40%

5-year MACRS depreciation used

Service life of heat exchanger = 12 y