Petrobras, the Brazilian energy company, has identified two alternatives to provide potable water to offshore platforms—purchase and operate the equipment, or contract long term with Manal and Associates, an international oilfield service corporation. For the estimates shown, use capitalized cost analysis at i = 6% per year to determine (a) the better economic choice for Petrobras, and (b) the maximum annual M&O cost that will cause Manal and Associates to succeed in winning the contract.
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(a) Develop the spreadsheet with 2% increases in M&O for purchase and a constant
$10,000 for contract (C5 is the anchor cell). Decision: Purchase the equipment.
(b) Use Goal Seek to change cell C5. Manal would have to decrease its M&O cost to a much smaller $902 per year from the estimated $10,000.
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