Question

A motor is required to drive a pump to remove water from a tunnel. The unit will be

needed for a period of 5 years.

The following alternatives are under consideration.

Alternative X calls for the construction of a power line and purchase of the electric

motor at a total cost of $4800. The salvage value of this equipment after 5 years is

estimated to be $700.

The cost of electricity for per hour of the operation is estimated to be $2.84 and the

maintenance is estimated as $390 per year.

Alternative Y calls for purchase of diesel engine pump set at a cost of $1725 and it

will have no salvage value at the end of 5 years period. The cost of diesel per hour of

operation is estimated at $1.46 maintenance is estimated at $0.51 per hour operation

and the cost of wages chargeable when the engine runs is $2.75 per hour.

How many hours per year the two machines have to run so that the two alternatives

incur equal costs. If the no. of hours of operation is estimated at 100 hours which

alternative is more economical? Take interest rate at 12% per year.
ya​

Answer 1

Answer:

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Explanation: