**Example 1**

A new heat exchanger is required in conjunction with a rearrangement of existing facilities. Because of corrosion, the expected life of a 90-10 copper-nickel heat exchanger is 7 years. The installed cost is $9,700. An alternative to this heat exchanger is a unit fabricated of 70-30 Cu-Ni, with an installed cost of $16,500 and an estimated life of 12 years to be written of in 10 years. An expected interest rate over the next ten years, is 8%, with a tax rate of 44% and the depreciation method is straight-line. Determine which unit would be more economical based on annual costs.

Because of its lower corrosion resistance you know that the 90-10 Cu-Ni heat exchanger in the first problem will require the use of an extra dose of oxygen scavenger and you know that this will cost you a minimum of $1,400 per year. Determine if the choice established in the first problem would be modified.

A paint system originally cost $5.12 per square meter to apply and has totally failed after 4 years. Assume an interest rate of 8%; a tax rate of 44% and straight line depreciation to answer the following questions:

- If the paint system is renewed twice at the same cost for a total life of 12 years, what is the annual cost, assuming the first application is capitalized and those in the 4th and 8th considered to be expenses ?
- Total maintenance could be avoided by biennial touchup (wire brush, spot primer, and topcoat). What is the most that can be spent on this preventative maintenance ?

A plant storage tank requires either a) a replacement to last 4 years with no maintenance, at a cost of $7,200, or b) a coating system on the existing tank to achieve the same life. How much can be spent now for coating installation if annual coating maintenance costs are 10% of the installation costs. Assume an interest rate of 8%; a tax rate of 44% and straight line depreciation.