$In$ order $to$ replace $an$ old process for producing a polymer that reduces friction loss $in$ engines, two current$-$technology machines have

been identified. Process $K$ will have a first cost $of$ $$160,000,an$ operating cost $of$ $$7000$ per month, and a salvage value $of$ $$50,000$

after $1$ year and $$40,000$ after its maximum $2-$year life. Process $L$ will have a first cost $of$ $$210,000,an$ operating cost $of$ $$5000$ per

month, and salvage values $of$ $$100,000$ after $1$ year, $$70,000$ after $2$ years, $$45,000$ after $3$ years, and $$26,000$ after its maximum $4-$

year life. The company's MARR $is12\%$ per year compounded monthly.

$An$ existing process involving polymers that reduce friction loss $in$ engines $is$ described above. Assume $itis$ possible $todoan$

augmentation and upgrade $to$ the existing process machinery that will provide $a2-$year extension $to$ its useful life. Call this Process $M.$

The upgrade will cost $$50,000$ now, have $an$ increased operating cost $of$ $$9,000$ per month, and $no$ salvage value after the $2-$year

extension. Using the same criteria mentioned $in$ above statement, that $is,$ effective $i=1\%$ per month and $a2-$year study period, $isit$

economically advantageous $to$ upgrade $(optionM)orto$ purchase the equipment for Process $KorL?$

Required:

Determine which process $is$ economically better.

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Use the Open Excel $in$ New Tab button $to$ launch this question.

When finished $in$ Excel, use the Save and Return $to$ Assignment button $in$ the lower right $to$ return $to$ Connect. Required:

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$\begin{array}{cc}\text{P}\text{r}\text{o}\text{c}\text{e}\text{s}\text{s}K& 2-\text{y}\text{e}\text{a}\text{r}\text{s}\text{t}\text{u}\text{d}\text{y}\text{p}\text{e}\text{r}\text{i}\text{o}\text{d}\\ \text{A}\text{W}\text{K}2& ?\\ \text{P}\text{r}\text{o}\text{c}\text{e}\text{s}\text{s}L& 2-\text{y}\text{e}\text{a}\text{r}\text{s}\text{t}\text{u}\text{d}\text{y}\text{p}\text{e}\text{r}\text{i}\text{o}\text{d}\\ ?& ?\\ ?& ?\\ ?& \text{P}\text{r}\text{o}\text{c}\text{e}\text{s}\text{s}M\end{array}$

Determine which process $is$ economically better?

Select the process which $is$ economically better?