An irrigation company has a pump bought at the end of year 2018 (three years back)...

Transcribed Image Text:

An irrigation company has a pump bought at the end of year 2018 (three years back) with the cost of RM100,000. This old pump is estimated could be used up to year 2025 or it can be sold this year and replaced by a new eco-friendly pump. The price of new eco-friendly pump is RM90,000. The market value (MV) and operating and maintenance (O&M) costs from year 2019 until year 2025 have been presented in Table 4(b) with the MARR of 8%. The company would like to make the assessment on this year (2021). Year 2019 2020 2021 2022 2023 2024 2025 Table Q4(b): MV and O&M costs from year 2019-year 2025 New Eco-friendly Pump Old Pump MV at EOY O&M Cost (RM) (RM) MV at EOY (RM) 95,000 85,000 73,000 60,000 40,000 20,000 10,000 O&M Cost (RM) 10,000.00 12,000.00 15,000.00 20,000.00 30,000.00 45,000.00 48,000.00 90,000 80,000 75,000 70,000 65,000 11,000 11,500 12,500 14,500 (i) (ii) Assess the economic life of the new eco-friendly pump with detailed steps of calculation. (12 marks) Evaluate the year of the old pump should be replaced. (3 marks) An irrigation company has a pump bought at the end of year 2018 (three years back) with the cost of RM100,000. This old pump is estimated could be used up to year 2025 or it can be sold this year and replaced by a new eco-friendly pump. The price of new eco-friendly pump is RM90,000. The market value (MV) and operating and maintenance (O&M) costs from year 2019 until year 2025 have been presented in Table 4(b) with the MARR of 8%. The company would like to make the assessment on this year (2021). Year 2019 2020 2021 2022 2023 2024 2025 Table Q4(b): MV and O&M costs from year 2019-year 2025 New Eco-friendly Pump Old Pump MV at EOY O&M Cost (RM) (RM) MV at EOY (RM) 95,000 85,000 73,000 60,000 40,000 20,000 10,000 O&M Cost (RM) 10,000.00 12,000.00 15,000.00 20,000.00 30,000.00 45,000.00 48,000.00 90,000 80,000 75,000 70,000 65,000 11,000 11,500 12,500 14,500 (i) (ii) Assess the economic life of the new eco-friendly pump with detailed steps of calculation. (12 marks) Evaluate the year of the old pump should be replaced. (3 marks)

Answer rating: 100% (QA)

The present value of the new pump would be PV 95000 85... View the full answer