An engineer must decide between two ways to pump concrete to the top of a seven-story building. Plan 1 requires the leasing of equipment for $60,000 initially and will cost between $0.40 and $0.95 per metric ton to operate, with a most likely cost of $0.50 per metric ton. The pumper is able to deliver 100 metric tons per 8-hour day. If leased, the asset will have a contract period of 5 years. Plan 2 is rental option that will cost $15,000 per year. In addition, an extra $15 per hour labor cost will be incurred for operating the rented equipment per 8-hour day. Which plan should the engineer recommend if the equipment will be needed for 50 days per year? The MARR is 12% per year.
An engineer must decide between two ways to
pump concrete to the top of a seven-story building.
Plan 1 requires the leasing of equipment for
$60,000 initially and will cost between $0.40 and
$0.95 per metric ton to operate, with a most likely
cost of $0.50 per metric ton. The pumper is able
to deliver 100 metric tons per 8-hour day. If
leased, the asset will have a contract period of
5 years. Plan 2 is rental option that will cost
$15,000 per year. In addition, an extra $15 per
hour labor cost will be incurred for operating the
rented equipment per 8-hour day. Which plan
should the engineer recommend if the equipment
will be needed for 50 days per year? The MARR
is 12% per year.
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