A chemical reactor, which will contain corrosive liquids, has been designed. The reactor may be made of mild steel or stainless steel. The initial cost, including installation, of a mild steel reactor is expected to be P72,000 and would last 5 years. Stainless steel is more resistant to the corrosive action of the liquids, but more expensive and will costP120,000. Assuming that both types of reactors will have no salvage or scrap value at the end of their useful lives and could be replaced at the same costs as before, and if money is worth 12% compounded annually, what should the useful life of the stainless reactor be so that the capitalized costs are equal?

A chemical reactor, which will contain corrosive liquids, has been designed. The reactor may be made of mild steel or stainless steel. The initial cost, including installation, of a mild steel reactor is expected to be P72,000 and would last 5 years. Stainless steel is more resistant to the corrosive action of the liquids, but more expensive and will costP120,000. Assuming that both types of reactors will have no salvage or scrap value at the end of their useful lives and could be replaced at the same costs as before, and if money is worth 12% compounded annually, what should the useful life of the stainless reactor be so that the capitalized costs are equal?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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