Question
The State Legislature has mandated a statewide recycling program to include all types of plastic, paper, metal, and glass refuse. The goal is zero landfill
The State Legislature has mandated a statewide recycling program to include all types of plastic, paper, metal, and glass refuse. The goal is zero landfill by 2020. Two options for the materials separation equipment are outlined below. The interest rate for state-mandated projects is 5% per year.
Contractor option (C): $8 million now and $25,000 per year will provide separation services at a maximum of 15sites. No contract period is stated; thus the contract and services are offered for as long as the State needs them.
Purchase option (P): Purchase equipment at each site for $275,000 per site and expend an estimated $12,000 in annual operating costs (AOC). Expected life of the equipment is 5 years with no salvage value.
(a) Perform a capitalized cost analysis for a total of 10 recycling sites.
(b) Determine the maximum number of sites at which the equipment can be purchased and still have a capitalized cost less than that of the contractor option.
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