Problem 4 (10 Points): Polytec Chemical, Inc. must decide between two additives to improve the dry-weather stability of its low-cost acrylic paint. Additive A will have an equipment and installation cost of $136,000 and an annual cost of $55,000. Additive B will have an installation cost of $175,000 and an annual cost of $31,000. If the company uses a five-year recovery period for paint products and an MARR of 30% per year, which process is favored on the basis of an incremental rate of return analysis? Also, determine the value of Ai". Hint: What is the rate of return equation for the incremental cash flows between the two processes. Solution