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Task 1: A cement plant plans to open a new rock pit. Two plans have been devised for movement of raw material from the quarry
Task 1: A cement plant plans to open a new rock pit. Two plans have been devised for movement of raw material from the quarry to the plant. Plan A requires the purchase of two earthmovers and construction of an unloading pad at the plant. Plan B calls for construction of a conveyor system from the quarry to the plant. The costs for each plan are itemized in the following table. Which plan should be selected using present worth analysis, consider i = 5%, 10%, 15%, 20% and 25% per year? Find the breakeven interest rate which governing the selection. Plan A Plan B First cost, P Annual operation cost Salvage value Life, years Mover $45,000 $6,000 $5,000 Pad $28,000 $300 $2,000 12 Conveyor System $175,000 $2,500 $10,000 24 8
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