A chemical process in your plant leaves scale deposits on the inside of pipes. The scale cannot be removed, but increasing the pumping pressure maintains flow through the narrower diameter. The pipe costs $35 per foot to install, and it has no salvage value when it is removed. The pumping costs are $8 per foot of pipe initially, and they increase annually by $7.50 per year starting in Year 2. What is the economic life of the pipe if the interest rate is 12%?

A chemical process in your plant leaves scale deposits on the inside of pipes. The scale cannot be removed, but increasing the pumping pressure maintains flow through the narrower diameter. The pipe costs $35 per foot to install, and it has no salvage value when it is removed. The pumping costs are $8 per foot of pipe initially, and they increase annually by $7.50 per year starting in Year 2. What is the economic life of the pipe if the interest rate is 12%?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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