Maximum expenditure for the auxiliary equipment

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Reference no: EM13837237

A high pressure pump at a methane gas (bio fuel) plant in Memphis costs $29000 for installation and has an estimated life of 12 years. By the addition of a specialized piece of auxiliary equipment, an annual savings of $500 in operating expense for the pump can be realized, and the estimated life of the pump can be doubled to 24 years. The salvage (market) value of either alternative is negligible at any time. If the MARR is 5% per year, what present expenditure for the auxiliary equipment can plant managers justify spending?

a) The maximum expenditure for the auxiliary equipment (to the nearest hundreds)?

Reference no: EM13837237

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