An environmental engineer wants to evaluate three different methods for disposin
ID: 1141340 • Letter: A
Question
An environmental engineer wants to evaluate three different methods for disposing of nonhazardous chemical waste land application, fluidized-bed incineration, and private disposal contract. Use the estimates below to help her determine which has the least cost at i-8% per year on the basis of an annual worth evaluation. First Cost AOC per Year Salvage Value Life Land $-140,000 $95,000 Incineration $-850,000 $-56,000 $350,000 6 years Contract 0 $-150,000 0 2 years 532,000S 4 years The environmental engineer selects a(Click to select) private disposal contract land application fluidized-bed incinerationExplanation / Answer
Lets find PW of each method
PW(Land)=-(Initial Cost+PW of AOC for 4 years )-PW of Salvage Value
=-140000-95000(1/1.08+1/1.08^2+1/1.08^3+1/1.08^4)+32000/1.08^4
=-431131.9
PW(Incineration)=-(Initial Cost+PW of AOC for 6years )-PW of Salvage Value
=-850000-560000(1/1.08+1/1.08^2+1/1.08^3+1/1.08^4+1/1.08^5+1/1.08^6)+350000/1.08^6
=-3218253
PW(Contract)=-(Initial Cost+PW of AOC for 6years )-PW of Salvage Value
=0-150000(1/1.08+1/1.08^2)=-267489
Hence Contract has lowest cost than other 2 forms
therefore Private disposal contract to be chosen