Question

ENGINEERING ECONOMY

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 energy required. The power plant installed costs P2,000,000, annual operation and maintenance P800,000, other expenses P100,000 per year. The life of the plant is 15 years, salvage value at the end of the life is P200,000. Annual taxes and insurance 6% of first cost, and the rate of interest is 15%. Using the sinking fund method for depreciation, determine if the power plant is justifiable

Answer 1

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