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 $235000, followed by annual maintenance expenses of $43000 over a 8-year period of time. At the end of its useful life salvage value of wet storage will be $77000. Dry storage has a $295000 capital investment and $29000 per year upkeep expenses over its 6-year life. At the end of its useful life salvage value of dry storage will be $65000. If the company's MARR is 5% 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 $235000, followed by annual maintenance expenses of $43000 over a 8-year period of time. At the end of its useful life salvage value of wet storage will be $77000. Dry storage has a $295000 capital investment and $29000 per year upkeep expenses over its 6-year life. At the end of its useful life salvage value of dry storage will be $65000. If the company's MARR is 5% per year, which method should be adopted? (assume repeatability)

Answer rating: 100% (QA)

To calculate the net present value NPV of each method we need to discount all future cash flows to t... View the full answer