A food processing plant consumes 600,000 kW of electric energy annually and pays an average of ₱ 2.00 per kWh. A study is being made to generate its own power to supply the energy required in the food processing plant, and the power plant installation would cost ₱ 2,000,000.00. Annual operation and maintenance is ₱ 800,000, other expenses cost ₱ 100,000 per year. The life of the power plant is 15 years; salvage value at the end of life is ₱ 200,000; annual taxes and insurances, 6% of first cost; and interest rate is 15%. Determine if the power plant is justifiable using:a. Rate of Return Methodb. Annual Worth Methodc. Present Worth Methodd. Future Worth Method 2. A food processing plant consumes 600,000 kW of electric energy annually and pays an average of 2.00 per kWh. A study isbeing made to generate its own power to supply the energy required in the food processing plant, and the power plantinstallation would cost 2,000,000.00. Annual operation and maintenance isyear. The life of the power plant is 15 years; salvage value at the end of life isfirst cost; and interest rate is 15%. Determine if the power plant is justifiable using:800,000, other expenses cost 100,000 per200,000; annual taxes and insurances, 6% ofa. Rate of Return Methodb. Annual Worth Methodc. Present Worth Methodd. Future Worth Method

Annual cost for electric energy = 6,00,000KWh (P2.00/kWh) = P1,200,000 Maintenance = P800,000 Other…

Answered: A food processing plant consumes…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

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A food processing plant consumes 600,000 kW of electric energy annually and pays an average of ₱ 2.00 per kWh. A study is being made to generate its own power to supply the energy required in the food processing plant, and the power plant installation would cost ₱ 2,000,000.00. Annual operation and maintenance is ₱ 800,000, other expenses cost ₱ 100,000 per year. The life of the power plant is 15 years; salvage value at the end of life is ₱ 200,000; annual taxes and insurances, 6% of first cost; and interest rate is 15%. Determine if the power plant is justifiable using:

a. Rate of Return Method

b. Annual Worth Method

c. Present Worth Method

d. Future Worth Method

2. A food processing plant consumes 600,000 kW of electric energy annually and pays an average of 2.00 per kWh. A study is
being made to generate its own power to supply the energy required in the food processing plant, and the power plant
installation would cost 2,000,000.00. Annual operation and maintenance is
year. The life of the power plant is 15 years; salvage value at the end of life is
first cost; and interest rate is 15%. Determine if the power plant is justifiable using:
800,000, other expenses cost 100,000 per
200,000; annual taxes and insurances, 6% of
a. Rate of Return Method
b. Annual Worth Method
c. Present Worth Method
d. Future Worth Method

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