A pump is needed for 10 years at a remote location. The pump can be driven by an
ID: 1099935 • Letter: A
Question
A pump is needed for 10 years at a remote location. The pump can be driven by an electric motor if a power line is extended to the site. Otherwise, a gasoline engine will be used. Use an annual cash flow analysis and an 8% interest rate. How should the pump be powered?
Gasoline
Electric
First cost
2400
9000
Annual operating cost
1200
250
Annual maintenance
300
50
Salvage value
300
600
Life, in years
5
10
Electric
Gasoline
Neither is acceptable
Either one will do
Gasoline
Electric
First cost
2400
9000
Annual operating cost
1200
250
Annual maintenance
300
50
Salvage value
300
600
Life, in years
5
10
Explanation / Answer
A. Electric