A food processing plant consumed 600,000 kW of electric energy annually and pays an average of P2.50 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 6% of the first cost; and rate of interest is 15%. Using the sinking fund method for depreciation, what is the cost savings/loss if the power plant is to be generated (indicated negative(-) sign if the cost is a loss) using the Present Worth Method
A food processing plant consumed 600,000 kW of electric energy annually and pays an average of P2.50 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 6% of the first cost; and rate of interest is 15%. Using the sinking fund method for depreciation, what is the cost savings/loss if the power plant is to be generated (indicated negative(-) sign if the cost is a loss) using the Present Worth Method
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A food processing plant consumed 600,000 kW of electric energy annually and pays an average of
P2.50 per kWh. A study is being made to generate its own power to supply the plant the energy
required, and that the power plant installed would cost P2,000,000. Annual operation and
maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage
value at the end of life is P200,000; annual taxes and insurances, 6% of the first cost; and rate of
interest is 15%. Using the sinking fund method for depreciation, what is the cost savings/loss if the
power plant is to be generated (indicated negative(-) sign if the cost is a loss) using the Present Worth
Method.
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