Motors from two different manufacturers are being considered. Motor A is 45hp and Motor B is 60hp, both are 460 volts, 3-phase and 60 Hz, but motor A operates at 80% efficiency whereas motor B operates at 88% efficiency. The expected life of motor A is 20 years and Motor B is 18 years. Motor A costs P60,000 and Motor B costs P75,000. Electrical energy costs P2.00 per kwh and the motors will be operated 8 hours per day, 250 days per year. Motor A has P5000 year maintenance and Motor B has P4500 per year maintenance. Motor A has a salvage value of P3000. Assume taxes are 30%. Which motor should be purchased if money worth 15% and how much is needed yearly cost for this motor?

Motors from two different manufacturers are being considered. Motor A is 45hp and Motor B is 60hp, both are 460 volts, 3-phase and 60 Hz, but motor A operates at 80% efficiency whereas motor B operates at 88% efficiency. The expected life of motor A is 20 years and Motor B is 18 years. Motor A costs P60,000 and Motor B costs P75,000. Electrical energy costs P2.00 per kwh and the motors will be operated 8 hours per day, 250 days per year. Motor A has P5000 year maintenance and Motor B has P4500 per year maintenance. Motor A has a salvage value of P3000. Assume taxes are 30%. Which motor should be purchased if money worth 15% and how much is needed yearly cost for this motor?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Motors from two different manufacturers are being considered. Motor A is 45hp and Motor B is
60hp, both are 460 volts, 3-phase and 60 Hz, but motor A operates at 80% efficiency whereas
motor B operates at 88% efficiency. The expected life of motor A is 20 years and Motor B is 18
years. Motor A costs P60,000 and Motor B costs P75,000. Electrical energy costs P2.00 per kwh
and the motors will be operated 8 hours per day, 250 days per year. Motor A has P5000 year
maintenance and Motor B has P4500 per year maintenance. Motor A has a salvage value of
P3000. Assume taxes are 30%. Which motor should be purchased if money worth 15% and how
much is needed yearly cost for this motor?

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