Required barrels of water per day, Finance Basics

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In the present case, we need to take a decision about implementing one of the available two options, based on various factors. The available two options are either to complete a semi finished structure or two install three new pumps to meet the required barrels of water per day.

Looking at the numbers as, we find that it is better to go ahead with the first option, i.e., to finish the semi completed module. The complete and detailed analysis has been carried out in the attached excel.

Considering the other factors, which are subjective in nature, we find the following:-

1. The capacity in case of first option will be more than the installation of three numbers 85000 BPWD pumps. The spare capacity may be of high use in days to come, as per the estimation of the company.

2. The completion of the bigger pump has an issue of shut down of the plant in case of its failure for which the estimated loss a year is calculated as $350,000 and is well considered in the calculation. But the other problems of the frequent shut downs cannot be overlooked. The smaller pumps would not bring shut down trouble.

Based on the above, we find that that going ahead with the first option will be good for the company.

 


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