Question: A pork-processing facility is considering installing either a storage facility or a holding pond. A biosystems engineer has been hired to evaluate the economic trade-offs

A pork-processing facility is considering installing either a storage facility or a holding pond. A biosystems engineer has been hired to evaluate the economic trade-offs for the two alternatives. The engineer estimates the cost of the storage facility to be $\$ 213,000$, with annual costs for maintenance to be $\$ 3,200$ per year. She estimates the cost of the pond to be $\$ 90,000$, plus $\$ 45,000$ for pumps and piping; annual operating and maintenance costs for the holding pond are estimated to be $\$ 8,500$. The engineer estimates the life of the storage facility and the pond to be around 20 years but is concerned about the accuracy of this estimate. She decides to do a sensitivity analysis.

a. Develop the equation she should use to determine how sensitive the economic decision is to changes in life. Use a MARR of 15 percent.

b. Determine which alternative is preferred for lives ranging from 15 to 25 years in 1 year increments.

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a To perform sensitivity analysis on the economic decision considering changes in the life of the facility or pond well use the Net Present Worth NPW method NPW calculates the present value of all cas... View full answer

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