A manufacturer is considering changing its process in order to reduce pollution emissions. Production will remain the

Question:

A manufacturer is considering changing its process in order to reduce pollution emissions. Production will remain the same. The current process has an annual operating cost of $850,000 and an annual waste disposal cost of $150,000. The new process would have an annual operating cost of $700,000 and a waste disposal cost of $85,000. Presently it will cost $300,000 to modify the existing process line to effect these changes. Based on the present worth, and assuming an 8% and a five year life, does it make economic sense to make the process line changes?
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...