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.