Problem:
Life-cycle costing. New Life Metal Recycling and Salvage has just been given the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to New Life at no cost. New Life intends to extract scrap metal at the site for 24 months, and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow:
![1858_Life-cycle costing.jpg](https://secure.tutorsglobe.com/CMSImages/1858_Life-cycle costing.jpg)
Ignore time value of money.
Required
1. Assuming that New Life expects to salvage 50,000 tons of metal from the site, what is the total project life cycle cost?
2. Suppose New Life can sell the metal for $150 per ton and wants to earn a profit (before taxes) of $40 per ton.
At what price must New Life sell the land at the end of the project to achieve its target profit per ton?
3. Now suppose New Life can only sell the metal for $140 per ton and the land at $100,000 less than what you calculated in requirement
2. If New Life wanted to maintain the same mark-up percentage on total project life-cycle cost as in requirement 2, by how much would it have to reduce its total project life-cyclecost?