A recapping plant is planning to acquire a new diesel engine set to replace its present unit which they run during power interruptions. The new diesel set would cost $135,000 with a five years life and zero residual value. Annual operating cost would be $150,000. On the other hand, the present generating set has a remaining life of 5 years. Its present value is $7,500 but has a zero residual value after 5 years. Annual operating costs is placed at $187,500. If MARR=10%, which is more profitable -to buy the new generator set or retain the present set? Calculate the difference in annual costs between the two alternatives.

A recapping plant is planning to acquire a new diesel engine set to replace its present unit which they run during power interruptions. The new diesel set would cost $135,000 with a five years life and zero residual value. Annual operating cost would be $150,000. On the other hand, the present generating set has a remaining life of 5 years. Its present value is $7,500 but has a zero residual value after 5 years. Annual operating costs is placed at $187,500. If MARR=10%, which is more profitable -to buy the new generator set or retain the present set? Calculate the difference in annual costs between the two alternatives.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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