Unit A: | |||||
Annual net savings: | |||||
Energy savings | 18000 | ||||
less: Annual operating cost | 1900 | ||||
Net annual savings | 16100 | ||||
Multiply: Annuity pVF at 12% for 5 yrs | 3.12717 | ||||
Present value of inflows | 50347.44 | ||||
Add: PV of salvage (2000*0.437109) | 874.218 | ||||
Total present value f inflows | 51221.66 | ||||
Less: Investment | 44000 | ||||
NPV | 7221.655 | ||||
Divide: Annuity PVF at 12% fofr 5 yrs | 3.12717 | ||||
Annual Worth | 2309.326 | ||||
Unit-B | |||||
Annual net savings: | |||||
Energy savings | 19500 | ||||
less: Annual operating cost | 1400 | ||||
Net annual savings | 18100 | ||||
Multiply: Annuity pVF at 12% for 7 yrs | 3.81153 | ||||
Present value of inflows | 68988.69 | ||||
Add: PV of salvage (4000*0.313925) | 1255.7 | ||||
Total present value f inflows | 70244.39 | ||||
Less: Investment | 65000 | ||||
NPV | 5244.393 | ||||
Divide: Annuity PVF at 12% fofr 5 yrs | 3.81153 | ||||
Annual Worth | 1375.929 | ||||
Unit-A is preferred | |||||
2. (35 points) The Mowbot plant must replace an existing HVAC unit (doing nothing is not...
2. (35 points) The Mowbot plant must replace an existing HVAC unit (doing nothing is not an option). You are evaluating two pieces of equipment (Unit A and Unit B). Each unit offers a saving in annual energy cost over the existing equipment. Unit A $44,000 Unit B $65,000 Up front cost Operating cost/year Energy savings/year $1,900 $1,400 $18,000 $19,500 Salvage Value $2,000 $4,000 Economic life, years 5 7 Mowbot's MARR is 18%. Based on annual worth analysis (not incremental),...
A factory is considering two investment alternatives to replace the equipment in one of its areas of production, given the existing equipment is vastly deteriorated. Proyect A Proyect B Cost of Equipment $82,000 $94,000 Expected Annual Savings $18,100 $16,500 Residual Value $21,400 $22,850 Useful Life (years) 10 10 Annual maintenance costs are presumed identical for both alternatives. The company is going to make one of the investments, which is why not doing anything is not considered a viable alternative. The...