Two 180-horsepower (HP) motors are being considered for installation at a municipal sewage-treatment plant. The first costs

Question:

Two 180-horsepower (HP) motors are being considered for installation at a municipal sewage-treatment plant. The first costs $5,800 and has an operating efficiency of 83%. The second costs $4,600 and has an efficiency of 80%. Both motors are projected to have zero after a life of 10 years. If all the annual charges, such as insurance, maintenance, etc., amount to a total of 15% of the original cost of each motor and if power costs are a flat 5 cents per kilowatt-hour, how many minimum hours of full-load operation per year are necessary to justify purchasing the more expensive motor at i = 6%? (A conversion factor you might find useful is 1 HP = 746 watts = 0.746 kilowatts.)
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...