A special-purpose 30-horsepower electric motor has an efficiency of 90%. Its purchase and installation price is $2,200. A second 30-horsepower high-efficiency motor can be purchased for $3,200, and its efficiency is 93%. Either motor will be operated 4,000 hours per year at full load, and electricity costs $0.10 per kilowatt-hour (kWh). MARR = 15% per year, andneither motor will have a market value at the end of the eight-year study period.Most motors are operated at a fraction of their rated capacity (i.e., full load) in industrial applications. Suppose the average usage (load factor) of the motor is expected to be 60%.Which motor should be recommended under this condition?

A special-purpose 30-horsepower electric motor has an efficiency of 90%. Its purchase and installation price is $2,200. A second 30-horsepower high-efficiency motor can be purchased for $3,200, and its efficiency is 93%. Either motor will be operated 4,000 hours per year at full load, and electricity costs $0.10 per kilowatt-hour (kWh). MARR = 15% per year, andneither motor will have a market value at the end of the eight-year study period.Most motors are operated at a fraction of their rated capacity (i.e., full load) in industrial applications. Suppose the average usage (load factor) of the motor is expected to be 60%.Which motor should be recommended under this condition?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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