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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Question
A steam generation system at a biomassfueled power plant uses an electro static precipitator (ESP) to clean its gaseous effluents. The power plant has consistently made use of the same type of ESP over the past several years. The installed cost of a new ESP has been relatively constant at $80,000. Records of operation and maintenance expenses indicate the following average expenses per year as a function of the age of the ESP. The MVs of the ESP are also reasonably well known as a function of age. Determine the best time to replace the ESP if the MARR is 15% per year.
Transcribed Image Text:Year
1
2
3
4
O&M
expense $30,000 $30,000 $35,000 $40,000 $45,000
Market
value
60,000 50,000 40,000 25,000 12,500
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