Modernization of pumping station in water treatment facility

Assignment Help Financial Management

Reference no: EM13848188

Currently, two options are available for modernization of a pumping station in a water treatment facility. Option 1 is to install a pumping system which is more durable at a cost of $20,000. With this option, the system will require to be replaced every 15 years. The maintenance cost for this system runs at $4,000 every five years. Option 2 is to install a cheaper pumping system. It costs $12,000. However, the system must be replaced every 6 years. The maintenance cost for this system is $1,600 every 2 years. Compute the present worth capitalized cost for each option and decide which one would be to our advantage. The interest rate is at 7% per year.

Reference no: EM13848188

Questions Cloud

What some major concerns you had regarding milgram study : Review Argosy's IRB Checklist. Gather information on Stanley Milgram's study on obedience and authority. Using the IRB checklist as a guideline, what were some major concerns you had regarding the Milgram study

How would the minimum yearly cash inflow change : Breakeven cash inflows The One Ring Company, a leading producer of fine cast silver jewelry, is considering the purchase of new casting equipment that will allow it to expand its product line. If One Ring requires a 9% return on its investment, what..

What specialized vocabulary is used : What specialized vocabulary is used?What other language features do you notice?

Equivalent uniform annual cost analysis method : Two alternatives are suggested for improvement to a power generation plant. Alternative A costs $60,000 and provides yearly benefit of $16,000. Alternative B requires $84,000 of initial cost. However, it will yield benefits in the order of $22,000 pe..

Modernization of pumping station in water treatment facility : Currently, two options are available for modernization of a pumping station in a water treatment facility. Option 1 is to install a pumping system which is more durable at a cost of $20,000. With this option, the system will require to be replaced ev..

What is the present value of your offer : You have just been offered a job. Your base salary will be $75,000 per year and the first year’s annual salary will be received one year from the day you start working. You receive a bonus immediately of $12,500. Your salary will grow 4 percent per y..

What is jacks annualized holding period return : Jack purchased 100 shares of Green Forest INC stock of at a price of $157.65 three months ago. He sold all stocks today for $158.57. During this period the stock paid dividends of $5.67 per share. What is Jacks annualized holding period return ( annu..

What is the value of the bond : A European bond has a par value of 1000 Euros, a coupon rate of 3.9 percent and a yield to maturity of 3.2 percent. The bond has 19 years to maturity. Coupons are made annually. What is the value of the bond?

Exchange rate risk-political risk and transfer pricing : Capital budgeting can be affected by exchange rate risk, political risk, transfer pricing, and strategic risk. Explain how these factors may and can impact capital budgeting.

User Account

All Pages