Corrosive liquids are transported through pipes in a factory . Ordinary pipes will have an installed cost of P30,000 and their useful life is 3 years . Stainless steel pipes are higly resistant to the corrosive effect of the liquids and are being considered as an alternative . These pipes are estimated to have an installed cost of P55,000 . Salvage value is zero in each case . If money is worth 8% and assuming replacement costs to be the same as the original prices , what should be the useful life of the stainless steel pipes to have equal capitalized cost as the ordinary pipes? A) 5.3 years C) 5.9 years B) 5.6 years D) 6.2 years
Corrosive liquids are transported through pipes in a factory . Ordinary pipes will have an installed cost of P30,000 and their useful life is 3 years . Stainless steel pipes are higly resistant to the corrosive effect of the liquids and are being considered as an alternative . These pipes are estimated to have an installed cost of P55,000 . Salvage value is zero in each case . If money is worth 8% and assuming replacement costs to be the same as the original prices , what should be the useful life of the stainless steel pipes to have equal capitalized cost as the ordinary pipes? A) 5.3 years C) 5.9 years B) 5.6 years D) 6.2 years
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Corrosive liquids are transported through pipes in a factory . Ordinary pipes will have an installed
cost of P30,000 and their useful life is 3 years . Stainless steel pipes are higly resistant to the corrosive effect
of the liquids and are being considered as an alternative . These pipes are estimated to have an installed cost
of P55,000 . Salvage value is zero in each case . If money is worth 8% and assuming replacement costs to be the
same as the original prices , what should be the useful life of the stainless steel pipes to have equal capitalized
cost as the ordinary pipes?
A) 5.3 years C) 5.9 years
B) 5.6 years D) 6.2 years
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