A large utility company is considering two mutually exclusive methods for storing its coal combustion by...
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A large utility company is considering two mutually exclusive methods for storing its coal combustion by products. One method is wet storage and the second method is dry storage. The company must adopt one of those two methods for all 28 of its ash and gypsum impoundments at seven coal-fired power plants. Wet storage requires an initial investment of $260000, followed by annual maintenance expenses of $40000 over a 10-year period of time. At the end of its useful life salvage value of wet storage will be $70000. Dry storage has a $280000 capital investment and $20000 per year upkeep expenses over its 7-year life. At the end of its useful life salvage value of dry storage will be $90000. If the company's MARR is 6% per year, which method should be adopted? (assume repeatability) A large utility company is considering two mutually exclusive methods for storing its coal combustion by products. One method is wet storage and the second method is dry storage. The company must adopt one of those two methods for all 28 of its ash and gypsum impoundments at seven coal-fired power plants. Wet storage requires an initial investment of $260000, followed by annual maintenance expenses of $40000 over a 10-year period of time. At the end of its useful life salvage value of wet storage will be $70000. Dry storage has a $280000 capital investment and $20000 per year upkeep expenses over its 7-year life. At the end of its useful life salvage value of dry storage will be $90000. If the company's MARR is 6% per year, which method should be adopted? (assume repeatability)
Expert Answer:
Answer rating: 100% (QA)
To determine which method should be employed we can compare the present value PW of each storage methods expenditures and salvage values The technique with the lowest PW will be selected Calculate the ... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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