There are two options for setting up a plant. One of these options will be preferred. Information about the options is given in the table on the right. According to this;
a) Using the Investment Cost Table, determine which option should be applied with the Annual Equivalent Cost method.

b) Calculate the present value of the investment cost for each option.

c) Using the Income Statement, determine which option should be applied using the Annual Equivalent Income method.

d) Determine which option should be applied using the Annual Equivalent Net Income method.

e) Prepare a table to find the payback period for the preferred option according to the Annual Equivalent Net Income method.

f) According to the Annual Equivalent Net Income method, find the period the investment for the preferred option.

 

Investment Amount Table INCOME STATEMENT Costs and Expenses Initial Investment Cost Annual Operation and Maintenance Expenses Annual Labor Expense Additional Major Maintenance in Year 4 Additional Major Maintenance in 5th Year Scrap Value Economic life Cost of Capital YEARS 1 2 3 4 5 6 7 00 8 9 10 Option B 1.285.000 928.000 11.500 9.850 40.000 42.000 17.000 Option A 15.000 80.000 10 18% 67.000 8 18% Annual Income A B 95.000 75.000 100.000 130.000 160.000 120.000 350.000 250.000 380.000 375.000 370.000 335.000 125.000 125.000 185.000 180.000 205.000 150.000