An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a
An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper can pump 100 metric tons per 8-hour day. If leased, the asset will have a contract period of 5 years. Plan 2 is a rental option that will cost $17,000 per year. In addition, an extra $13.5 per hour labor cost will be incurred for operating the rented equipment per 8-hour day. Which plan should the engineer recommend if the equipment will be needed for 90 days per year? The MARR is 12% per year.
Transcribed Image Text:The annual worth of plan 1 lease optimistic is $
The annual worth of plan 1 most likely is $
The annual worth of plan 1 pessimistic is $
The annual worth of plan 2 rental is $
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