Question: Consider these two alternatives for solid-waste removal: Alternative A: Build a solid-waste processing facility. Financial variables are as follows: Capital Investment Annual operating expenses 108
Consider these two alternatives for solid-waste removal: Alternative A: Build a solid-waste processing facility. Financial variables are as follows: Capital Investment Annual operating expenses 108 million $ 3.46 million Estimated market value Expected useful life 40% of initial capital cost 10 years Alternative B: Contract with dealers for solid-waste disposal after treatment process. Financial variables are as follows: Capital Investment Annual operating expenses Estimated market value Repairs costs Annual fee to dealers $17 million (this is for treatment process) $2.10 million $ 3.0 million every five years $10.5 million $0 20 years Expected contract period a) Using the Declining-Balance (DB) method for depreciation, determine the ratio of the depreciation, R of Alternative A b) Which alternative is recommended? Take MARR = 10%. State all your assumptions. c) How much annual operating expense could Alternative A be in order to break even with Alternative B d To which factor Alternative B is more sensitive, annual operating expenses, repair costs, or annual fee? Explain
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