A food processing plant consumes 600,000 kW-hr of electrical energy annually and pays an average of P 2.00 per kW-hr. A study is being made to generate its own power to supply the plant the energy required. The power plant installed, costs P 2,000,000; annual operation and maintenance, P 800, 000; other expenses, P 100,000 per year. The life of the plant is 15 years; salvage value at the end of life is P 200,000; annual taxes and insurance 6% of first cost, and the rate of interest is 15 %. Using the sinking fund method for depreciation, determine the ROR of the power plant.

A food processing plant consumes 600,000 kW-hr of electrical energy annually and pays an average of P 2.00 per kW-hr. A study is being made to generate its own power to supply the plant the energy required. The power plant installed, costs P 2,000,000; annual operation and maintenance, P 800, 000; other expenses, P 100,000 per year. The life of the plant is 15 years; salvage value at the end of life is P 200,000; annual taxes and insurance 6% of first cost, and the rate of interest is 15 %. Using the sinking fund method for depreciation, determine the ROR of the power plant.

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Description: A food processing plant consumes 600,000 kW-hr of electrical energy annually and pays an average of P2.00 per kW-hr. A study is being made to generate its own power to supply the plant the energyrequired. The power plant installed, costs P 2,000,000

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 46P

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