Page 347 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

Expected savings from solar collector alone 2.0/yr

Expected savings from insulation and solar collector
2.5/yr

Other maintenance on house
2.0/yr

Assessed value of house (2007)
300

Interest rate of savings if do not spend money 6.5%
p.a.

Number of years assumed lifetime of insulation and solar collector
15

If there were a tax credit for installing the solar collector in the year in which it was installed,
how much of a tax credit (in % of initial investment) would be required to make the solar

collector alone a worthwhile investment?

You have been asked to evaluate several investment opportunities for the biotechnology company for
which you work. These potential investments concern a new process to manufacture a new,
genetically engineered pharmaceutical. The financial information on the process alternatives are as
follows.

23.

For the alternatives, the capital investment and the yearly after-tax cash flows are incremental to the
base case. The assumed plant life is 12 years, and all of the capital investment occurs at time = 0.

a. If an acceptable, nondiscounted rate of return on investment (ROROI) is 25% p.a., which is the
best option?

b. If an acceptable, after-tax, discounted rate of return is 15% p.a., which option is the best?

Your company is considering investing in a process improvement that would require an initial capital
investment of $500,000. The projected increases in revenue over the next seven years are as follows.