(SOLVED) Penmark Orchards and Cannery is considering buying high pressure cleaning


Question Description:

$20

Penmark Orchards and Cannery is considering buying high pressure cleaning equipment that vacuums waste liquids into a storage tank and then purifies the waste. The waste water can then be pumped back onto orchards The system will avoid any leakage of liquid waste into the Murray River, which has happened once every two years, and will avoid the related workers’ compensation claims that have arisen every five years. The operating characteristics are as follows:
Initial outlay for new equipment, 10 year life, no residual value ……….. $489 345
Annual operating cost over 10 year life ………………………………… $15 904 p.a.
Depreciation ……………………………………………………………. 10% pa.
Savings in water cost due to reclaimed water …………………………. $15 987 pa.
Total cost of cleaning and maintaining the system every 4 years ……… $14 900
Workers’ compensation claims ……………………………………….. $5 500
Required:
1. Prepare a summary of the total costs for the waste cleaning system for the next 10 years.
2. Should Renmark Orchards invest in this equipment even if it is uneconomic?

Answer

$20