The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Four different pieces of processing equipment are being considered:

The company can obtain a 15% annual return on its' investment in other projects and is willing to invest money on the processing equipment only as long as it can obtain 15% annual return on each increment of money invested. Which one, if any, of the alternatives should be selected? Use a rate of return analysis.

Transcribed Image Text:

utial nvestment $10,000 $18,000 $25,000 $30,000 Annual saving 4,000 6,000 7.500 9,000 in materials costs Annual operating 2,000 3.000 3000 4,000 cost