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A chemical firm is considering purchasing pumps for its processes. Its desires an ROI of...

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Accounting

A chemical firm is considering purchasing pumps for its processes. Its desires an ROI of 20%. The steel units are less expensive but require more frequent maintenace due to the corrosive liquids being pumped. The life of all systems is 5 years. The following cost apply.

Carbon Steel: Initial Cost: $150,000 Oper. Cost/year: $75,000 Annual Maint.: $100,000 Salvage Value:$500 Variable Cost/hr:$1.10

Stainless: Initial Cost: $275,000 Oper. Cost/year: $40,000 Annual Maint.: $50,000 Salvage Value:$1,000 Variable Cost/hr:$0.95

Alloy 37: Initial Cost: $400,000 Oper. Cost/year: $35,000 Annual Maint.: $20,000 Salvage Value:$10,000 Variable Cost/hr:$0.72

The pumps run continuously except when they are down for repairs.

A. Determine the isocost points for all the alternatives.

B. Plot the costs on a graph a spreadsheet.

C. Indicate the ranges of econmomical use for the pumps.

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