A high-pressure pump at a methane gas (biofuel) plant in Memphis costs $30,000 for installation and has
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A high-pressure pump at a methane gas (biofuel) plant in Memphis costs $30,000 for installation and has an estimated life of 12 years. By the addition of a specialized piece of auxiliary equipment, an annual savings of $400 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 6% per year, what present expenditure for the auxiliary equipment can plant managers justify spending?
MARR Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Assume a 24year study period Alternative 1 no auxiliary equipment has a negative cash flow ...View the full answer
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