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A motor is required to drive a pump to remove water from a tunnel. The unit will be needed for a period of 5 years. The following alternatives are under consideration. Alternative X calls for the construction of a power line and purchase of the electric motor at a total cost of $4800. The salvage value of this equipment after 5 years is estimated to be $700. The cost of electricity for per hour of the operation is estimated to be $2.84 and the maintenance is estimated as $390 per year. Alternative Y calls for purchase of diesel engine pump set at a cost of $1725 and it will have no salvage value at the end of 5 years period. The cost of diesel per hour of operation is estimated at $1.46 maintenance is estimated at $0.51 per hour operation and the cost of wages chargeable when the engine runs is $2.75 per hour. How many hours per year the two machines have to run so that the two alternatives incur equal costs. If the no. of hours of operation is estimated at 100 hours which alternative is more economical? Take interest rate at 12% per year.

A motor is required to drive a pump to remove water from a tunnel. The unit will be needed for a period of 5 years. The following alternatives are under consideration. Alternative X calls for the construction of a power line and purchase of the electric motor at a total cost of $4800. The salvage value of this equipment after 5 years is estimated to be $700. The cost of electricity for per hour of the operation is estimated to be $2.84 and the maintenance is estimated as $390 per year. Alternative Y calls for purchase of diesel engine pump set at a cost of $1725 and it will have no salvage value at the end of 5 years period. The cost of diesel per hour of operation is estimated at $1.46 maintenance is estimated at $0.51 per hour operation and the cost of wages chargeable when the engine runs is $2.75 per hour. How many hours per year the two machines have to run so that the two alternatives incur equal costs. If the no. of hours of operation is estimated at 100 hours which alternative is more economical? Take interest rate at 12% per year.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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4B. A motor is required to drive a pump to remove water from a tunnel. The unit will be (05) needed for a period of 5 years. The following alternatives are under consideration. Alternative X calls for the construction of a power line and purchase of the electric motor at a total cost of $4800. The salvage value of this equipment after 5 years is estimated to be S$700. The cost of electricity for per hour of the operation is estimated to be $2.84 and the maintenance is estimated as $390 per year. Alternative Y calls for purchase of diesel engine pump set at a cost of $1725 and it will have no salvage value at the end of 5 years period. The cost of diesel per hour of operation is estimated at $1.46 maintenance is estimated at $0.51 per hour operation and the cost of wages chargeable when the engine runs is $2.75 per hour. How many hours per year the two machines have to run so that the two alternatives incur equal costs. If the no. of hours of operation is estimated at 100 hours which alternative is more economical? Take interest rate at 12% per year.
Transcribed Image Text:4B. A motor is required to drive a pump to remove water from a tunnel. The unit will be (05) needed for a period of 5 years. The following alternatives are under consideration. Alternative X calls for the construction of a power line and purchase of the electric motor at a total cost of $4800. The salvage value of this equipment after 5 years is estimated to be S$700. The cost of electricity for per hour of the operation is estimated to be $2.84 and the maintenance is estimated as $390 per year. Alternative Y calls for purchase of diesel engine pump set at a cost of $1725 and it will have no salvage value at the end of 5 years period. The cost of diesel per hour of operation is estimated at $1.46 maintenance is estimated at $0.51 per hour operation and the cost of wages chargeable when the engine runs is $2.75 per hour. How many hours per year the two machines have to run so that the two alternatives incur equal costs. If the no. of hours of operation is estimated at 100 hours which alternative is more economical? Take interest rate at 12% per year.
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