Subject - Engineering Project Management

c. Which of the two investi 2. A small company is considering installing an upgrade that will save in power costs adding to the profit. The equipment upgrade is expected to cost $250,000. The owners expect this equipment will only be required for five years after which it will be removed and scrapped (another process change will make this unnecessary). The anticipated profit in the first year is $70,000 and will decrease by $5,000 per year for the next three. The interest rate for this project is 6% (9pt) a. Should the company consider this project? Why or why not? b. If the cost of $15,000 to remove the upgrade equipment is added to the final year does this change the decision to install it? Why or why not? C. Assume the upgrade equipment can be sold for $30,000 at the end of the five years to another company but there will be maintenance required in year three costing $20,000, is this now a viable project? Why or why not? Use Net Present Value and show your calculations. Guture Value (4pt)