Reference no: EM132772091

Question - Renmark Orchards and Canary is considering buying high pressure cleaning equipment that vacuums waste liquid into a storage tank and then purifies the waste. The wastewater can then be pumped back onto orchards. The system will avoid any leakage of liquid waste into the Murray River, which has happened once every two years and will avoid the related workers' compensation claims that have arisen every five years. The operating characteristics are as follows:

Initial outlay for new equipment 10-year life no residual value $489,345

Annual operating cost over 10-year life $15,904

Depreciation 10% p.a.

Savings in water cost due to reclaimed water $15,987

Total cost of cleaning and maintaining the system every 4 years $4900

Workers' compensation claims $5,500

Required -

1) Prepare a summary of the total cost for the waste cleaning system for the next 10 years?

2) Should Renmark Orchards invest in this equipment even if it is uneconomic?