14.
An oil refinery finds that it is now necessary to process its waste liquids in a costly
treating process before discharging them into a nearby stream. Engineering
department estimates that the waste liquid processing will cost $30,000 at the end of
the first year. By making process and plant alterations, it is estimated that the waste
treatment will decline $3000 each year. As an alternate, a specialized firm, Hydro-
Clean, has offered a contract to process the waste liquids for ten years for a fixed price
of $15,000 per year, payable at the end of each year. Either way, there should be no
need for waste treatment after ten years. If the refinery manager considers 8% a
suitable interest rate, should he accept the Hydro-Clean offer or not?