An industrial plant has hired a contractor to develop a solar farm nearby for the industrial plant's electricity consumption. During the 3-year construction period, the contractor will need to run a generator to power the construction. Cost analysis from previous projects indicates: Generator Brand Installed Cost Cost per Hour A $22M $500 B $23M $400 C $25M $250 D $30M $150 At the end of 3 years, the generator will have a salvage value equal to the cost of removing them. The generator will operate 6,000 hours per year. The lowest interest rate at which the contractor is willing to invest money is 7%. (The minimum required interest rate for invested money is called the minimum attractive rate of return, or MARR.) Select the alternative with the least present worth of cost. O Choice "C" with $29,872,900 O Choice "B" with $29,298,320 O Choice C with $28,936,450 O Choice "A" with $29,872,900
An industrial plant has hired a contractor to develop a solar farm nearby for the industrial plant's electricity consumption. During the 3-year construction period, the contractor will need to run a generator to power the construction. Cost analysis from previous projects indicates: Generator Brand Installed Cost Cost per Hour A $22M $500 B $23M $400 C $25M $250 D $30M $150 At the end of 3 years, the generator will have a salvage value equal to the cost of removing them. The generator will operate 6,000 hours per year. The lowest interest rate at which the contractor is willing to invest money is 7%. (The minimum required interest rate for invested money is called the minimum attractive rate of return, or MARR.) Select the alternative with the least present worth of cost. O Choice "C" with $29,872,900 O Choice "B" with $29,298,320 O Choice C with $28,936,450 O Choice "A" with $29,872,900
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An industrial plant has hired a contractor to develop a solar farm nearby for the industrial
plant's electricity consumption. During the 3-year construction period, the contractor will
need to run a generator to power the construction. Cost analysis from previous projects
indicates:
Generator Brand
Installed Cost
Cost per Hour
A
$22M
$500
B
$23M
$400
C
$25M
$250
D
$30M
$150
At the end of 3 years, the generator will have a salvage value equal to the cost of removing
them. The generator will operate 6,000 hours per year. The lowest interest rate at which the
contractor is willing to invest money is 7%. (The minimum required interest rate for invested
money is called the minimum attractive rate of return, or MARR.) Select the alternative with
the least present worth of cost.
O Choice "C" with $29,872,900
O Choice "B" with $29,298,320
O Choice C with $28,936,450
O Choice "A" with $29,872,900
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