8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 200,000 Salvage value Useful life, in years |150,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?
8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 200,000 Salvage value Useful life, in years |150,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer both part A and B
Transcribed Image Text:8-4 A paper mill is considering two types of pollution control equipment.
A
Neutralization Precipitation
Initial cost
$850,000
$625,000
Annual chemical cost 55,000
125,000
Salvage value
200,000
150,000
Useful life, in
years
5
(a) Construct a choice table for interest rates from 0% to 100%.
(b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?
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