Question

3. Two advanced thermal insulating and anti-condensation protection alternatives have been proposed for new Antarctica marine vessels subject to the harsh marine environment. One alternative must be selected. Estimated savings from reduced total installation and maintenance costs over conventional insulation are the following: Alternative Installed cost Annual savings Life, years Delta-T Alpha-B $15,000 $6250 $13,000 $4750 8 8 Which alternative should be recommended based on the present worth method? Use a MARR of 18% and a study period of 8 years. Assume zero salvage values. (25 points)

Answer 1

Ans. In such a case, we will compute the NPV for both the projects, the project with the higher NPV will be recommended.

The formula to calculate NPV is: Aggregate of present value of cash inflows - Aggregate of present value of cash outflows

Attenatve 2 Alternative 1 (Delta-T $15000 $13050 Tnstalled les t (Enitial Investman 6250 750 Amual Sautngs 8 ( nh MARR 4.0775 18Y. =rc2 Resent Value Annuty factor for dears NPV of Projeut of fv of Cah nfion Agaate -Aaggat of A of eh eutfrog NPV, (Altennata = Y7S0X4.o7}5- 13000 19368-125-13000 -$ 6368.125 NPU, NPV, (Altenaie 2) NPU 6250 x4.07I5 - ISeo 25484.375-15a0 NPV $10484.315 Ace ording e to NPV of altennative-2 Net Preent Value ie Alpha-a is hiphar than Atennative 1 .Therefore Alpha -6 Project Rs ecommended