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4) What is the present worth of the 180 mm pipe over the first 12 years of operation if operating costs increase by $0.75 (to a total of $1.75 per hour) beginning in year 7?

4) What is the present worth of the 180 mm pipe over the first 12 years of operation if operating costs increase by $0.75 (to a total of $1.75 per hour) beginning in year 7?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500 m away. Both 120 mm and 180 mm pipes are being considered. For this analysis, the company will use an annual interest rate of 10%. Annual maintenance and pumping costs may be considered to be paid in their entireties at the end of the year in which their costs are incurred. 120 mm pipe 180 mm pipe Initial Cost $2,500 $3,500 Service Life 12 years $300 $300 12 years $400 $200 $1.00 600 hours/year Salvage Value Annual Maintenance Pump cost/hour Pump operation $1.40 600 hours/year 3) What is the present worth of the 120 mm pipe over the first 12 years of operation? 4) What is the present worth of the 180 mm pipe over the first 12 years of operation if operating costs increase by $0.75 (to a total of $1.75 per hour) beginning in year 7? please solve number 4. thanks
Transcribed Image Text:An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500 m away. Both 120 mm and 180 mm pipes are being considered. For this analysis, the company will use an annual interest rate of 10%. Annual maintenance and pumping costs may be considered to be paid in their entireties at the end of the year in which their costs are incurred. 120 mm pipe 180 mm pipe Initial Cost $2,500 $3,500 Service Life 12 years $300 $300 12 years $400 $200 $1.00 600 hours/year Salvage Value Annual Maintenance Pump cost/hour Pump operation $1.40 600 hours/year 3) What is the present worth of the 120 mm pipe over the first 12 years of operation? 4) What is the present worth of the 180 mm pipe over the first 12 years of operation if operating costs increase by $0.75 (to a total of $1.75 per hour) beginning in year 7? please solve number 4. thanks
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