In the manufacturing process for a fine chemical, a manufacturer makes use of a pressure filter,...

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In the manufacturing process for a fine chemical, a manufacturer makes use of a pressure filter, initial cost $110,000, for a product isolation under hot, acid conditions. As a result of the latter, the operating cost (including maintenance) rises sharply with time and the salvage value of the equipment falls correspondingly sharply. The process is expected to operate for 7 years. Operating costs and salvage values as a function of time are given in the table below. It is suggested that the filter be replaced by a new unit before the end of the period of manufacture, in order to reduce equipment and maintenance costs. Since services, pipe work etc. are all in place, this can be done within the period of annual maintenance and it is anticipated that there will be no loss of production or other extra expenses. Using the Net Present Worth criterion at a MARR of 15%, and assuming that the pattern of expenditure with the replacement filter would follow that of the original: a. Calculate the NPV of the filter costs in the existing case. b. Show that replacement of the filter in year 4 is cost-effective Year Operating cost $o00 Salvage Value $000 37 85 39.5 76 3. 42 64 4 47 50 54 36 6 63 22 7. 72 8. In the manufacturing process for a fine chemical, a manufacturer makes use of a pressure filter, initial cost $110,000, for a product isolation under hot, acid conditions. As a result of the latter, the operating cost (including maintenance) rises sharply with time and the salvage value of the equipment falls correspondingly sharply. The process is expected to operate for 7 years. Operating costs and salvage values as a function of time are given in the table below. It is suggested that the filter be replaced by a new unit before the end of the period of manufacture, in order to reduce equipment and maintenance costs. Since services, pipe work etc. are all in place, this can be done within the period of annual maintenance and it is anticipated that there will be no loss of production or other extra expenses. Using the Net Present Worth criterion at a MARR of 15%, and assuming that the pattern of expenditure with the replacement filter would follow that of the original: a. Calculate the NPV of the filter costs in the existing case. b. Show that replacement of the filter in year 4 is cost-effective Year Operating cost $o00 Salvage Value $000 37 85 39.5 76 3. 42 64 4 47 50 54 36 6 63 22 7. 72 8.

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