Available Oct 1 at 10:30am - Oct 4 at 9:30pm 3 daysThe consolidated oil company must install antipollution equipment in a new refinery to meetfederal air legislation. Two types of equipment are being considered, which will have investmentand annual operating costs as follows;EquipmentACInvestmentP600,000P760,000P1,240,000P1,600,000Power68,00068,000120,000126,000Labor40,00045,00065,00050,000Maintenance660,000600,000420,000370,000Taxes and Insurance12,00015,00025,00028,000Assuming an economic life of 10 years for each type, no salvage value, and that the companywants a before-tax return of 20 % on its capital, determine which alternative should bepurchased using the following economic methods;a) Rate of return method.b) Annual cost methodc) Present worth methodd) Equivalent uniform annual cost method

A Rate of coming back (ROR) is that the gain or loss of associate degree investment over a…

Answered: The consolidated oil company must…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4-10 Improvement and expansion of a production facility are being given economic consideration. At the present time (Alternative A), profits are running at $450,000 per year. Assume a washout in operating profit in cach of years one through 10 so they will remain constant at $450,000 per year. Two mutually exclusive alternatives for improve- ment and improvement combined with expansion are being consid- ered with projected costs and revenues as shown on the following time diagrams with all dollar values expressed in thousands of dollars. 450 450 450 A) ..... .... 0. 2 10 ... -800 700 700 700 B) 2 ... 10 850 -900 C) -1,300 1,050 1,050 1 ..... 10 1) For a minimum rate of return of 15% determine whether the present project "A," improvement project "B," or improvement plus expansion project "C" is economically best using ROR, NPV, and PVR. 2) Then increase the minimum ROR to 25% from 15% over the entire 10-year evaluation life and re-evaluate the alternatives using both ROR and NPV…
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