Two heat treating systems are being considered for a metal forming process.
System A has an initial cost of $121,400 with annual costs of $8,000. After the first year an additional $1,000 of maintenance is required each year thereafter. The profits at the end of the first year after installing system A are $75,000, reducing linearly to $5,000 in year 15. System A has a 15-year life with no salvage value.
System B has an initial cost of $206,000 with annual operating costs of $5,000.
Installation of system B results in a uniform annual profit of $54,000. System B has a life of 15 years with no salvage value. The MARR for the project is 12%.
Determine which heat treatment system should be installed based on an economic analysis.