1. A manufacturer is considering changing its process to reduce pollution emissions. The current process has an annual operating cost of $850,000 and an annual waste disposal cost of $150,000. The new process will have an annual operating cost of $700,000 and a waste disposal cost of $85,000. It will cost $300,000 to modify the existing process line to effect these changes.
Based on present worth, and assuming an 8% discount rate and a five year life, does it make economic sense to make the process line changes?
In your answer, please show calculations and explain their significance.