A chemical plant is considering installing a new water purification system that costs S21 500. The expected service life of the system is 10 years and the salvage value is computed using the declining-balance method with a depreciation rate of 20%. The operating and maintenance costs are estimated to be $5 per hour of operation. The expected savings are S10 per operating hour.
(a) Find the annual worth of the new water purification system if the current operating hours are 1500 per year on average. ALARR is 10%.
(b) What is the break-even level of operating hours? Construct a graph showing the annual worth for various levels of operating hours.