Problem

The activated sludge unit of a wastewater treatment plant requires an aerator. Two options...

The activated sludge unit of a wastewater treatment plant requires an aerator. Two options exist and have the characteristics shown in the table. The city owner of the treatment plant sets an interest rate of 8%. Analysis period is 10 years. Determine which aerator lo purchase.

 

Aerator A

Aerator B

Initial cost

400,000

200,000

Annual operating cost

60,000

75,000

Salvage value

60,000

20,000

Lifetime (years)

10

5

(a) Form the cash flow table for a present worth analysis, showing the correct sign for all entries. Also show the incremental cash flow column (A-B)

(b) Solve by present worth analysis,

(c) Solve by annual cash flow analysis.

(d) Solve by incremental benefit-cost ratio analysis.

(e) Solve by incremental rate of return analysis. Do not find the exact value for the incremental rate of return, just check at the MARR

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Solutions For Problems in Chapter 15