QUESTION 4

1. Two alternatives incorporating process improvement techniques to a production system have been developed and estimated. Assume mutually exclusive scenario and select the best alternative with CC (capitalized cost) analysis at an interest rate of 10% per year.

   Alternative	A 8-year improvement project	B Continuous improvement
   First cost, $	-2,000,000	-10,000,000
   Annual cost, $/year	-10,000	-50,000
   Salvage value, $	50,000	-
   Life, years	8

   		Alternative B with CC $-3,805,080
   		Alternative A with CC $-3,205,080
   		Alternative A with CC $-3,805,080
   		Alternative B with CC $-3,205,080