Holly Farms is considering two environmental chambers to accomplish detailed laboratory confirmations of online bacteria tests in chicken meat for the presence of E. coli 0157:H7 and Listeria monocytogenes. There is some uncertainty about how long the D103 chamber will be useful. A realistic estimate is 3 years, but pessimistic and optimistic estimates of 2 years and 6 years, respectively, are also reasonable. The estimated salvage value will remain the same. Using an interest rate of 10% per year, determine if any of the D103 estimates would result in a lower cost than that of the 490G chamber for a 6-year planning period. Chamber D103 Chamber 490G Installed cost, P, $ –400,000 −230,000 AOC, $ per year −4,000 −3,000 Salvage value at 10% of P, $ 40,000 23,000 Life, years 2, 3, or 6 2 The D103 estimates would result in a lower cost than that of the 490G chamber for a (Click to select) 3 6 2 -year planning period.
Holly Farms is considering two environmental chambers to accomplish detailed laboratory confirmations of online bacteria tests in chicken meat for the presence of E. coli 0157:H7 and Listeria monocytogenes. There is some uncertainty about how long the D103 chamber will be useful. A realistic estimate is 3 years, but pessimistic and optimistic estimates of 2 years and 6 years, respectively, are also reasonable. The estimated salvage value will remain the same. Using an interest rate of 10% per year, determine if any of the D103 estimates would result in a lower cost than that of the 490G chamber for a 6-year planning period.
|
|
Chamber D103 |
Chamber 490G |
|
Installed cost, P, $ |
–400,000 |
−230,000 |
|
AOC, $ per year |
−4,000 |
−3,000 |
|
Salvage value at |
40,000 |
23,000 |
|
Life, years |
2, 3, or 6 |
2 |
The D103 estimates would result in a lower cost than that of the 490G chamber for a (Click to select) 3 6 2 -year planning period.
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