There are two manufacturing processes that can be utilized by a company to reduce energy losses in the equipment. We have the following cost information available:
Initial cost | Process A: $180,000 Process B: $240,000
Operations and Management cost | Process A: $7,000 quarterly, Process B: $5,000 quarterly
Useful life | Process A: 3 years, Process B: 4 years
Residual value at the end of the useful life | Process A: $30,000 Process B: $42,000
Determine which process should be selected using the following analysis models:
a. Present value with an annual interest rate of 12% calculated quarterly.
b. Equivalent uniform quarterly value with an annual interest rate of 12% calculated quarterly.
c. Capitalized cost with an annual interest rate of 16% calculated quarterly.