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24. When a wind generator is installed th requires no further cash payment. How dition, it must undergo maintenance c payment of $5000. The solid lines on blue line shows the cost over time and from the generator. As the second yearly maintenanc that a significant upgrade is available f

24. When a wind generator is installed th requires no further cash payment. How dition, it must undergo maintenance c payment of $5000. The solid lines on blue line shows the cost over time and from the generator. As the second yearly maintenanc that a significant upgrade is available f

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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24. When a wind generator is installed there is a substantial initial cost, but daily operation requires no further cash payment. However, to keep the generator in proper operating con- dition, it must undergo maintenance once a year. Each maintenance cycle requires a cash payment of $5000. The solid lines on the following graph show this situation. The stepped blue line shows the cost over time and the straight brown line shows the revenue derived from the generator. As the second yearly maintenance approaches, you are informed by the manufacturer that a significant upgrade is available for additional cost. The upgrade will make the genera- tor far more efficient, thus the revenue would increase substantially. The yearly maintenance cost after the upgrade would still be $5000. The dashed lines show the cost and revenue projections if the upgrade is installed. (a) What is the amount of revenue per year without the upgrade? (b) What is the initial cost of the wind generator? (c) How many years after the initial installation do you break even if the upgrade is installed? List your answer as number of years + number of months. (d) What is the cost of the upgrade completed at the two-year maintenance cycle? Note that this amount includes the standard $5000 maintenance fee.
Transcribed Image Text:24. When a wind generator is installed there is a substantial initial cost, but daily operation requires no further cash payment. However, to keep the generator in proper operating con- dition, it must undergo maintenance once a year. Each maintenance cycle requires a cash payment of $5000. The solid lines on the following graph show this situation. The stepped blue line shows the cost over time and the straight brown line shows the revenue derived from the generator. As the second yearly maintenance approaches, you are informed by the manufacturer that a significant upgrade is available for additional cost. The upgrade will make the genera- tor far more efficient, thus the revenue would increase substantially. The yearly maintenance cost after the upgrade would still be $5000. The dashed lines show the cost and revenue projections if the upgrade is installed. (a) What is the amount of revenue per year without the upgrade? (b) What is the initial cost of the wind generator? (c) How many years after the initial installation do you break even if the upgrade is installed? List your answer as number of years + number of months. (d) What is the cost of the upgrade completed at the two-year maintenance cycle? Note that this amount includes the standard $5000 maintenance fee.
100,000 Breakeven Analysis for Wind Generator Cost without upgrade 80,000 Revenue without upgrade Cost with upgrade Revenue with upgrade 60,000 40,000 20,000 ilgioeitdua alobom 0. 6. 4 Time (t) [yr] igge al 105ib 29g (e) How many years after the initial installation would the profit be the same whether you opnitalo d ro d (f) How many years after the initial installation will you have made a profit of $25,000 if the upgrade is NOT installed? List your answer as number of years + number of upgrade or not? List your answer as number of years + number of months. months. to two years, though still at a cost of $5000 per maintenance, how many years after the initial installation will you break even after the upgrade? List your answer as number of years + number of months. r bog 1o9ani so (g) If the upgrade results in increased reliability, thus increasing the maintenance interval labom veoob Cost (C) and Revenue (R) [$]
Transcribed Image Text:100,000 Breakeven Analysis for Wind Generator Cost without upgrade 80,000 Revenue without upgrade Cost with upgrade Revenue with upgrade 60,000 40,000 20,000 ilgioeitdua alobom 0. 6. 4 Time (t) [yr] igge al 105ib 29g (e) How many years after the initial installation would the profit be the same whether you opnitalo d ro d (f) How many years after the initial installation will you have made a profit of $25,000 if the upgrade is NOT installed? List your answer as number of years + number of upgrade or not? List your answer as number of years + number of months. months. to two years, though still at a cost of $5000 per maintenance, how many years after the initial installation will you break even after the upgrade? List your answer as number of years + number of months. r bog 1o9ani so (g) If the upgrade results in increased reliability, thus increasing the maintenance interval labom veoob Cost (C) and Revenue (R) [$]
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