The New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products. Two types of equipment are being considered and their costs/revenues are shown below:

The process equipment will run for 3 years. With a MARR of 8%

Calculate the Future Value at EOY3 for each option:

Year 0 equipment A (32000) Equipment B (27500)

Year 1: Equip A 15,000 Equip B 17,000

Year 2: Equip A 22,000 Equip B: 16500

Year 3 equipment A 19000 equipment B 15000

Calculate the IRR for each option

Use Linear interpolation

Use Excel IRR Function to determine IRR for both types

Use incremental IRR analysis, which equipment should be selected and why?