Factory for intermittent use

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Reference no: EM131809368

A motor with a 200-horsepower output is needed in the factory for intermittent use. A Graybar motor costs $7000 and has an electrical efficiency of 89%. A Blueball motor costs $6000 and has an 85% efficiency. Neither motor would have any salvage value, since the cost to remove it would equal its scrap value. The annual maintenance cost for either motor is estimated at $300 per year. Electric power costs $0.072/kWh (1 hp =0.746 kW). If a 10% interest rate is used in the calculations, what is the minimum number of hours the higher initial cost Graybar motor must be used each year to justify its purchase?

Reference no: EM131809368

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