4) Two installations are being considered to provide for water storage in a chemical plant. Atank on a tower or a tank of equal capacity placed on a hill some distance from the plant. Thecost of installing the tank and tower is estimated at P350,000. The cost of installing the tank onthe hill, including the extra length of service lines, is estimated at P300,000. The hill installation willrequire an additional investment of P30,000 in pumping equipment whose life is estimated to be15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment isestimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18%effective. Which alternative should be used? (USE PW and EUAC) ;

The evaluation of costs and benefits is at the heart of economic analysis. To help with resource…

4) Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will equire an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW and EUAC);

4) Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will equire an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW and EUAC);

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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The city of Zamboanga contemplates to increase the capacity of their existing water transmission lines. Two plans are under considerations. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial costs is P2, 750, 000.00 and the life is 40 years, with an annual operating cost of P5, 000.00. Plan B requires the construction of a booster pumping stations coating P1, 050, 000.00 with the life of 40 years. The pumping equipment cost an additional amount of P250, 000.00, it has a life of 20 years and a salvage value of P25, 000. The annual operating costs is P165, 000.00. Which is the most economical plan if the interest rate is 12% and how much is the difference between the two plans. Use present worth method.
Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective. Which alternative should be used? (USE PW)
Two methods of carrying away surface runoff water from a new subdivision are being evaluated: METHOD A: Dig a ditch. The initial cost would be P3 million and P1 million of redigging and shaping would be required at five-year intervals forever. METHOD B: Lay concrete pipe, The initial cost would be P7.5 million, and replacement pipe would be required at 50-year intervals at a net cost of P9 million indefinitely. At i = 12%, which method is the better one in terms of having a smaller cost?
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A pork processing facility is considering the installation of either a storage facility or a holding pond. A biosystems engineer has been hired to evaluate the economic trade-offs for the two alternatives. The engineer estimates the cost of the storage facility to be $213,000, with annual costs for maintenance to be $3,200 per year. She estimates the cost of the pond to be $90,000, plus $45,000 for pumps and piping, and annual operating and maintenance costs for the holding pond are estimated to be $8,500. The engineer estimates the life of the storage facility and the pond to be around 20 years but is concerned about the accuracy of this estimate. She decides to do a sensitivity analysis. Solve, a. Develop the equation that she would use to determine how sensitive the economic decision is to changes in life. Use a MARR of 15%. b. Determine which alternative is preferred for lives ranging from 15 to 25 years.
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The city of San Fernando contemplates to increase the capacity of her existing water transmission lines. Two plans are under consideration. plan a requires the construction of a parallel pipeline , the flow being maintained by gravity. The initial cost is 2,750,000 and the life is 40 years, with an annual operating cost of 5,000. Plan B requires the construction of a booster pumping station costing 1,050,000 with the life of 40 years. The pumping equipment cost an additional amount of 250,000. It has a life of 20 years and a salvage value of 25,000. The annual operating cost is 165,000. Which is the most economical plan if the interest rate is 12% and how much is the difference between the two plans. Use Present worth Method.
Liwayway High School is planning to install solar panels to provide some of the electricity for its groundwater desalting facilty. The project would be done in two phases. The first phase will cost P400 million in year 1 and P500 million in year 2. This investment will result in energy savings (phase 2) of P54,000,000 in year 3, P54,600,000 in year 4, and amounts increasing by P600,000 each year through year 10. Let i = 10% per year.(a) What is the future worth of the savings?(b) Is the cost of the solar project justified by the savings? (Hint: Calculate the difference between savings and cost).
A site is under consideration for a bridge over a small river. The suspension bridge will cost $500M with annual inspection and maintenance cost of $350,000. In addition, the concrete deck would have to be reconstructed every 10 years at a cost of $1M. The cost of purchasing the right of way is expected to be $20M. find the capitalized cost.
The University of Mindanao is planning to create a new building for the Technology Transfer and Intellectual Property Management Office (TTIPMO) at the Matina Campus. Two proposals are being considered: The construction of the building now to cost Php 4,000,000.00 or the construction of a smaller building now to cost Php 3,000,000.00 and at the end of 5 years an extension to be added to cost Php 2,000,00.00. By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected
Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)