Question

5. (17) Three processing liquid capture systems for a parts washing station at a factory are under consideration to capture the washing liquid used so it does not go down the drain. The station is used only when needed not running all the time. Using a MARR of 8.0%, prepare a table with numbers showing the range of operating hours per year that each system is the best economic choice (lowest 'cost'). Conduct analysis before taxes. System Name Purchase Cost Life Yearly Required Maintenance 1,600 1,800 2,200 Hourly Operating Cost 11.50 1 13,000 10,000 18,000 2 5 13.50 3 0 9.00 Answer System 1 System 2 System 3

Answer 1

Having performed the analysis and estimated NPV for each case with hours ranging from 2 to 20 we calculate the NPV using operating cost and initial cost. And the one with lowest values is the best one.

Following spreadsheet shows the numbers for all the three systems:

Here we have assumed salvage value to be zero for each system.

Here whichever has the lowest values of NPV is most economic as our analysis is based on cost. So system 2 seems to be most economic as it has lowest cost for different values of hours worked. Also annual cost includes maintenance charges as well. Still 8 to 10 hours seem to be most optimal for each system.

life System purchase cost mainten hrly cost 1 13000 6 1600 11.5 10000 2 1800 13.5 18000 2200 10 annual days 365 system 1 daily hours annual opt hours 8 16 4 6 10 12 14 18 20 730 1460 2190 2920 3650 4380 5110 5840 6570 7300 annual cost 9995 18390 26785 35180 43575 51970 60365 68760 77155 85550 NPV 62902.14 104815.94 146729.74 188643.54 230557.34 272471.14 314384,94 356298.74 398212.54 440126.34 annual days 365 system 2 daily hours annual opt hours 6 8 10 12 14 16 18 20 4 730 2190 3650 5840 6570 7300 1460 2920 4380 5110 annual cost 11655 21510 31365 41220 51075 60930 70785 80640 90495 100350 60257.84 102753.85 145249.86 187745.87 230241.88 442721.93 NPV 272737.89 315233.90 357729.91 400225.92 annual days 365 system 3 daily hours 16 18 20 6 8 10 12 14 annual opt hours 4380 7300 730 1460 2190 2920 3650 5110 5840 6570 15340 annual cost 8770 28480 35050 48190 61330 21910 41620 54760 67900 NPV 81555.21 129167.26 176779.31 224391.37 272003.42 319615.47 367227.53 414839.58 462451.64 510063.69

system 1 - 10 hours, system 2 - 10 hours, system 3 - 8 hours.