A recapping plant is planning to acquire a new diesel engine set to replace its present unit which they run during power interruptions. The new diesel set would cost $135,000 with a five years life and zero residual value. Annual operating cost would be $150,000. On the other hand, the present generating set has a remaining life of 5 years. Its present value is $7,500 but has a zero residual value after 5 years. Annual operating costs is placed at $187,500. If MARR=10%, which is more profitable -to buy the new generator set or retain the present set? Calculate the difference in annual costs between the two alternatives.
A recapping plant is planning to acquire a new diesel engine set to replace its present unit which they run during power interruptions. The new diesel set would cost $135,000 with a five years life and zero residual value. Annual operating cost would be $150,000. On the other hand, the present generating set has a remaining life of 5 years. Its present value is $7,500 but has a zero residual value after 5 years. Annual operating costs is placed at $187,500. If MARR=10%, which is more profitable -to buy the new generator set or retain the present set? Calculate the difference in annual costs between the two alternatives.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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