An industrial coal-fired boiler for process steam is equippedwith a 10-year-old electrostatic precipitator (ESP). Changes incoal quality have caused stack emissions to be in noncompliancewith federal standards for particulate. Two mutually exclusivealternatives have been proposed to rectify this problem (doingnothing is not an option). New Baghouse: Capital investment$1,140,000, Annual operating expenses $73,200. New ESP: CapitalInvestment $992,500, Annual operating expenses $115,500. The lifeof both alternatives is 10 years, the effective tax rate is 40% andthe after-tax MARR is 9%. Both alternatives qualify as seven-yearMACRS (GDS) equipment. Make a recommendation regarding whichalternative to select based on after-tax analysis using NPV.
