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A food processing plant consumed 600,000 kwhof electric energy annually and pays an average of ?2.00 per kwh. Astudy is being made to generate its own power supply the plant the energy required, and that the power plant installed would cost?2,000,000. Annual operation and maintenance are ?800,000. Other expenses, ?100,000 per year. Life of power plant is 15 years; salvagevalue at the end of its life is ?200,000; annual taxes and insurance, 6%of first cost; and rate of interest is 15%. Using sinking fund method for depreciation, determine is the power plant justifiable.

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Financial Management, Finance

Category:- Financial Management
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