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A processing plant is considering whether to invest in a gasoline-driven pump or an electrically powered pump. The data are as follows: Item First
A processing plant is considering whether to invest in a gasoline-driven pump or an electrically powered pump. The data are as follows: Item First cost, $ Estimated Life, year Capital recovery at end of life, $ Annual utility expenses Annual maintenance Yearly benefit saving, $ Gasoline Pump 2500 3 600 500 300 1800 Electric Pump 5500 6 1500 600 250 2000 (a) If the MARR is 5%, which machine should be bought? Use the IRR analysis to determine your selection and compare the findings with the payback period method. Are there any differences in the outcome? Why? [25 Marks] [CO2, PO2, C4] the before-tax and (b) From the selection obtained from the IRR analysis (Q2 (a)), calculate after-tax rate of return using a 34% incorne tax rate. For this case, straight-line depreciation applies. [20 Marks] [CO2, PO2, C4]
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