Oil from a particular type of marine microalgae can be converted to biodiesel that can serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost will be $13 million and the maintenance & operating (M&O) cost will be $2.1 million per year. If long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better, ponds or tubes? Use a present worth analysis.
Oil from a particular type of marine microalgae can be converted to biodiesel that can serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost will be $13 million and the maintenance & operating (M&O) cost will be $2.1 million per year. If long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better, ponds or tubes? Use a present worth analysis.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 28P: Friedman Company is considering installing a new IT system. The cost of the new system is estimated...
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Oil from a particular type of marine microalgae can be converted to biodiesel that can serve as an alternate transportable fuel for automobiles and trucks. If lined ponds are used to grow the algae, the construction cost will be $13 million and the maintenance & operating (M&O) cost will be $2.1 million per year. If long plastic tubes are used for growing the algae, the initial cost will be higher at $18 million, but less contamination will render the M&O cost lower at $0.41 million per year. At an interest rate of 10% per year and a 5-year project period, which system is better, ponds or tubes? Use a present worth analysis.
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