Question

A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $8,500 to install and will have a useful life of 4 years with no salvage value. Annual costs for inspection, cleaning, etc. are expected to be $1,850. A new power line will cost $16,500 to install, with power costs expected to be $600 per year. Since the air sampling project will end in 4 years, the salvage value of the line is considered to be zero. At an interest rate of 13% per alternative should be selected on the basis of a future worth analysis? The future worth of solar cells is $ D a nd that of electric line is $ D . (Click to select) A should be selected on the basis of a future worth analysis.

Answer 1

Future worth of solar cell = -8500 * (F/P,13%,4) - 1850 * (F/A,13%,4)

= -8500 *1.630474 - 1850 *4.849797

= -22831.15 ~ -22831 (Nearest Dollar)

Future worth of electric line = -16500 * (F/P,13%,4) - 600 * (F/A,13%,4)

= -16500 *1.630474 - 600 *4.849797

= -29812.70 ~ -29813 (Nearest Dollar)

As Future worth of solar cell is less, it should be selected