A food processing plant consumed 450,000 kW of electric energy annually and pays an average of P2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 4% of first cost; and rate of interest is 14%. What is the rate of return? Is the power plant justifiable?
A food processing plant consumed 450,000 kW of electric energy annually and pays an average of P2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 4% of first cost; and rate of interest is 14%. What is the rate of return? Is the power plant justifiable?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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A food processing plant consumed 450,000 kW of electric energy annually and pays an average of P2.00 per kWh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P2,000,000. Annual operation and maintenance, P800,000. Other expenses P100,000 per year. Life of power plant is 15 years; salvage value at the end of life is P200,000; annual taxes and insurances, 4% of first cost; and rate of interest is 14%. What is the
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