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Trovallero Mining is contemplating purchasing a portable crusher for the production of crushed rock for...

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Finance

  1. Trovallero Mining is contemplating purchasing a portable crusher for the production of crushed rock for the maintenance of its roads. Given the following information, should Trovarello Mining continue outsourcing the crushed rock material or should it invest in the purchase of a portable crusher? What is the payback period of the project? Discuss your results. (12 points)

Cost of portable crusher: $850,000

Delivery: Included in price.

Expected economic live of crusher: 5 years

Depreciation method: Straight line

Tax rate: 30%

Cost of maintenance & operator: $160/hour (all maintenance is done on day shift)

Uptime of portable crusher: 5 hours / 8 hour shift (to be operated on day shift only, on a 5 day week basis, 251 days per year)

Cost of additional 8 hour shifts (same uptime will apply) if required: $38.50/hour

Portable crusher maximum output: 23 tonnes /hour

Yearly crushed rock requirement: 50,000 tonnes

Cost of outsourcing material:

Crushed rock delivered to headframe: $8.50/ tonne

Delivery underground through bore hole: $2.10/ tonne

Underground transport to storage area: $1.75/ tonne

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