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A chemical engineer is determining the most economical alternative by comparing three alternatives, as well as the do nothing alternative, for a new chemical process

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A chemical engineer is determining the most economical alternative by comparing three alternatives, as well as the do nothing alternative, for a new chemical process. He investigates the costs and the benefits for each of the alternatives and determines the net present worth of each alternative using a minimum attractive rate of return of 10%. All of the alternatives will have a life span of 20 years. The three potential alternatives being analyzed are listed in the table and figures are the cash flow diagrams for the potential chemical processes. Chemical Engineering Process Alternatives Uniform Net Alternative Total Investment Annual Benefit Chemical process 1 $500,000.00 $51.000.00 Chemical process 2 $950,000.00 $105,000.00 Chemical process 3 $1.500,000.00 $150,000.00 0 0 Do nothing Terminal Value at the End of 20 Years $300,000.00 $300,000.00 $400,000.00 0 F: $300.000
F$300,000 (= 10% A=551,000 20 Po=$500,000 NPWP Cash flow diagram for chemical process 1
F$300,000 1 = 10% A=$105,000 20 Po-$950,000 NPW- Cash flow diagram for chemical process 2
F70-$400,000 i 10% A = $150,000 20 Po $1.500.000 NPW-? Cash flow diagram for chemical process 3