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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![12.
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.
meany is concidering tu e alternati
ith regards to an eguipment which it needs The](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff7f8ef2d-941a-45db-a10d-f59bd0197d0f%2F81f2e22a-2d7c-41c1-a02a-34610d708c18%2Flgrobdl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:12.
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.
meany is concidering tu e alternati
ith regards to an eguipment which it needs The
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