Two 100-horsepower motors are under consideration by the Mighty Machinery Company. Motor Q costs $5,000 and operates at 90% efficiency. Motor R costs $3,500 and is 88% efficient. Annual operating and maintenance costs are estimated to be 15% of the initial purchase price. Power costs 3.2¢/ kilowatt-hour. How many hours of full-load operation are necessary each year in order to justify the purchase of motor Q? Use a 15-year planning horizon; assume that salvage values will equal 20% of the initial purchase price; and let the MARR be 15%. (Note: 0.746 kilowatts = 1 horsepower.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Two 100-horsepower motors are under consideration by the Mighty Machinery Company. Motor Q costs $5,000 and operates at 90% efficiency. Motor R costs $3,500 and is 88% efficient. Annual operating and maintenance costs are estimated to be 15% of the initial purchase price. Power costs 3.2¢/ kilowatt-hour. How many hours of full-load operation are necessary each year in order to justify the purchase of motor Q? Use a 15-year planning horizon; assume that salvage values will equal 20% of the initial purchase price; and let the MARR be 15%. (Note: 0.746 kilowatts = 1 horsepower.)

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