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What is the current annual cost of bringing in bottled water

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Question - A medium-sized nonprofit company in a remote desert incurs a cost of $170 a month to bring bottle water to quench the thirst of its volunteers. Someone suggested that they could collect rainwater from their roof if they bought a cistern, roof liner, and sterilizer for a total of $4,900. The sterilizer needs maintenance which would cost $1,580 a year in parts and chemicals. The sterilizer has a life of 25 years and cannot be resold. The sterilized water will be put into plastic bottles which would cost $100 per year for the estimated 450 cases of bottles a year needed. A local recycling company will pick up the used plastic bottles and give the nonprofit company $0.10 per case for them. You must use annual cash flow analysis and assume an interest rate of 6%.

(a) What is the current annual cost of bringing in bottled water?

(b) What would be the annual cost of the option that sterilizes the water?

(c) Would you buy the sterilizer system? Consider both economic and non-economic reasons.

Reference no: EM132676940

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