What is the minimum number of six year cycles

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You have identied two possible pumps for use in a plant. Pump A cost $1,000.00 and has an estimated lifespan of 2 years. Pump B cost $1,500.00 and has an estimated lifespan of 3 years. Based on a present value analysis and a time value of money of 10%, which pump do you recommend? Suppose that you are currently using the pump which is not recommended and want to switch to the recommended pump. For safety reasons, OSHA requires that the process is re-certied for the new pumps in order to be permitted to operate, a process often referred to as "management of change". The recertication will cost $150.00 per pump and appears as part of the sunk cost in year zero if the pumps are changed. What is the minimum number of 6 year cycles that the process must operate in order for the pump savings to cover the cost of re-certication?

Reference no: EM13145895

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