Item Pump I Pump II | Initial cost $6,000 $4,000 Efficiency Useful life 86% 80% 12 years 12 years Annual operating cost $500 $440 Salvage value $0 $0

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Two 180-horsepower water pumps are being considered for installation in a
farm. Financial data for these pumps are as follows:

If power cost is a flat 6 cents per kWh over the study period, determine the minimum number of hours of full-load operation per year that would justify the purchase of the more expensive pump at an interest rate of 8% ( 1 HP = 746 watts= 0.746 kilowatts).

Item
Pump I
Pump II |
Initial cost
$6,000
$4,000
Efficiency
Useful life
86%
80%
12 years
12 years
Annual operating cost
$500
$440
Salvage value
$0
$0
Transcribed Image Text:Item Pump I Pump II | Initial cost $6,000 $4,000 Efficiency Useful life 86% 80% 12 years 12 years Annual operating cost $500 $440 Salvage value $0 $0
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