13.) A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which run during brownouts. The new set would cost P135,000 with a (5) year life, and no estimated salvage value. The variable cost would be P150,000 a year. The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,5000, but it would be zero after 5 years. The variable operating cost would be P187,500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing the computation.
13.) A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which run during brownouts. The new set would cost P135,000 with a (5) year life, and no estimated salvage value. The variable cost would be P150,000 a year. The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,5000, but it would be zero after 5 years. The variable operating cost would be P187,500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing the computation.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:13.) A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which run
during brownouts. The new set would cost P135,000 with a (5) year life, and no estimated salvage value. The
variable cost would be P150,000 a year.
The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal
value now is P7,5000, but it would be zero after 5 years. The variable operating cost would be P187,500 a year.
Money is worth 10%.
Which is profitable, to buy the new generator set or retain the present set? Support your answer by
showing the computation.
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