Present Worth Analysis

2. A large multinational company requires a certain very expensive processed liquid substance for its production process. It is considering two (2) systems to achieve the objective in terms of their economic sense. Use a MARR of 12% per year and the present worth method to select one of the systems (data given in Table 2). Table 2 Equipment first cost (RM) Annual operating costs (RM per year) Salvage cost (% of first cost) Cost of processed liquid (RM per 1,000 litres) System A -20 -0.5 5 4 System B -22 -0.3 10 5 Some initial estimates for the liquid processing system indicated that the typical life of the system is 10 years, the processed liquid substance requirement is 1500 litres/min and the operating time is 16 hours per day for 250 days per year