A pump for a reservoir must be operated continuously (8,760 hours per year). In the event of

Question:

A pump for a reservoir must be operated continuously (8,760 hours per year). In the event of a large storm, the electricity from the local utility€™s power grid may be interrupted for an indefinite period of time. To deal with this emergency situation, two mutually exclusive backup diesel generators are being investigated. One of them will be chosen for implementation. Relevant data are provided as follows:

Generator A Generator B Initial investment Annual operating and maint. Useful life, years $100,000 $130,000 9,500 15 8,0

If salvage values of both generators are negligible and the study period is 60 years, which generator should be chosen? The MARR is 10% per year.

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... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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