A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which they run during brownouts. The new set would cost P135,000 with a five (5) year-life, and no estimated salvage value. Variable cost would be P150,000 a year. The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,500, but it would be zero after 5 years. Variable operating cost would be P187,500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing your computation and tables
A recapping plant is planning to acquire a new Diesel generating set to replace its present unit which they run during brownouts. The new set would cost P135,000 with a five (5) year-life, and no estimated salvage value. Variable cost would be P150,000 a year. The present generating set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,500, but it would be zero after 5 years. Variable operating cost would be P187,500 a year. Money is worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support your answer by showing your computation and tables
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A recapping plant is planning to acquire a new Diesel generating set to replace its present
unit which they run during brownouts. The new set would cost P135,000 with a five (5) year-life,
and no estimated salvage value. Variable cost would be P150,000 a year. The present generating
set has a book value of P75,000 and a remaining life of 5 years. Its disposal value now is P7,500,
but it would be zero after 5 years. Variable operating cost would be P187,500 a year. Money is
worth 10%. Which is profitable, to buy the new generator set or retain the present set? Support
your answer by showing your computation and tables.
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