Question
In: Economics
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather conditions. One alternative must be selected. Estimated savings in heat loss and installation cost are given below:
|
Thickness |
Installation cost |
Annual savings |
Maintenace once in each 2 years |
|
2cm |
$222000 |
$80000 |
$3400 |
|
5cm |
$360000 |
$151000 |
0 |
a.) Useful lives of both alternatives are 6 years. Which thickness would you recommend for a MARR= 9% per year and negligible market (salvage) values using Annual Worth Analysis?
b.) Useful life of 2 cm Thickness alternative is 6 years and useful life of 5 cm thickness alternative is 9 years. Which thickness would you recommend for a MARR= 9% per year and negligible market (salvage) values using Annual Worth Analysis? (Use repeatability assumption)
in excel both questions
Solutions
Expert Solution
Using Excel
| interest rate | 9% | |
| a. | For 2 cm thickness | |
| Installation cost | -222000 | |
| Annual savings | 80000 | |
| Maint (every 2 yrs) | -3400.00 | |
| Life | 6 | |
| Present worth | 131603.13 | |
| Annual Worth | 29,336.94 | |
| For 5 cm thickness | ||
| Installation cost | -360000 | |
| Annual savings | 151000 | |
| Maint (every 2 yrs) | 0.00 | |
| Life | 6 | |
| Present worth | 317373.71 | |
| Annual Worth | 70,748.88 | |
| As AW of 5 cm thickness is more, it should be selected | ||
| interest rate | 9% | |
| b. | For 2 cm thickness | |
| Installation cost | -222000 | |
| Annual savings | 80000 | |
| Maint (every 2 yrs) | -3400.00 | |
| Life | 6 | |
| Present worth | 131603.13 | |
| Annual Worth | 29,336.94 | |
| For 5 cm thickness | ||
| Installation cost | -360000 | |
| Annual savings | 151000 | |
| Maint (every 2 yrs) | 0.00 | |
| Life | 9 | |
| Present worth | 545282.28 | |
| Annual Worth | 90,952.43 | |
| As AW of 5 cm thickness is more, it should be selected | ||
Showing formula in Excel
| interest rate | 0.09 | |
| a. | For 2 cm thickness | |
| Installation cost | -222000 | |
| Annual savings | 80000 | |
| Maint (every 2 yrs) | -3400 | |
| Life | 6 | |
| Present worth | =C3+PV(C1,C6,-C4)+PV(C1,2,,-C5)+PV(C1,4,,-C5) | |
| Annual Worth | =PMT(C1,C6,-C7) | |
| For 5 cm thickness | ||
| Installation cost | -360000 | |
| Annual savings | 151000 | |
| Maint (every 2 yrs) | 0 | |
| Life | 6 | |
| Present worth | =C11+PV(C1,C14,-C12) | |
| Annual Worth | =PMT(C1,C14,-C15) | |
| As AW of 5 cm thickness is more, it should be selected | ||
| interest rate | 0.09 | |
| b. | For 2 cm thickness | |
| Installation cost | -222000 | |
| Annual savings | 80000 | |
| Maint (every 2 yrs) | -3400 | |
| Life | 6 | |
| Present worth | =C21+PV(C19,C24,-C22)+PV(C19,2,,-C23)+PV(C19,4,,-C23) | |
| Annual Worth | =PMT(C19,C24,-C25) | |
| For 5 cm thickness | ||
| Installation cost | -360000 | |
| Annual savings | 151000 | |
| Maint (every 2 yrs) | 0 | |
| Life | 9 | |
| Present worth | =C29+PV(C19,C32,-C30) | |
| Annual Worth | =PMT(C19,C32,-C33) | |
| As AW of 5 cm thickness is more, it should be selected |
Rahul Sunny answered 2 months agoRelated Solutions
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a
process steam line subject to severe weather conditions. One
alternative must be selected. Estimated savings in heat loss and
installation cost are given below:
Q: Useful life of 2 cm Thickness alternative is 10 years and
useful life of 5 cm thickness alternative is 5 years. Which
thickness would you recommend for a MARR= 0.13 per year and
negligible market (salvage) values using a)Present
Worth Analysis? b) Annual Worth Analysis? (Use...
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a
process steam line subject to severe weather conditions. One
alternative must be selected. Estimated savings in heat loss and
installation cost are given below:
THICKNESS
INSTALLATION COST
ANNUAL SAVINGS
MAINTENANCE ONCE IN EACH 2 YEARS
2cm
$125000
$62000
$4800
5cm
$408000
$125000
$0
d.) Useful lives of both alternatives are 8 years. Find the best
alternative using Simple Payback Period Method.
IN EXCEL PLZ!!
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a
process steam line subject to severe weather conditions. One
alternative must be selected. Estimated savings in heat loss and
installation cost are given below:
THICKNESS
INSTALLATION COST
ANNUAL SAVINGS
MAINTENANCE ONCE IN EACH 2 YEARS
2cm
$125000
$62000
$4800
5cm
$408000
$125000
$0
b.) Useful life of 2 cm Thickness alternative is 8 years and
useful life of 5 cm thickness alternative is 7 years. Which
thickness would you recommend for...
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a
process steam line subject to severe weather conditions. One
alternative must be selected. Estimated savings in heat loss and
installation cost are given below:
THICKNESS
INSTALLATION COST
ANNUAL SAVINGS
MAINTENANCE ONCE IN EACH 2 YEARS
2cm
$125000
$62000
$4800
5cm
$408000
$125000
$0
a.) Useful lives of both alternatives are 8 years. Which
thickness would you recommend for a MARR= 9% per year and
negligible market (salvage) values using Present Worth...
Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather...
Two insulation thickness alternatives have been proposed for a
process steam line subject to severe weather conditions. One
alternative must be selected. Estimated savings in heat loss and
installation cost are given below:
Useful lives of both alternatives are 10 years. Find the best
alternative using A) simple payback period method
B) discounted payback period when MARR= 0.13 per
year.
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Installation cost
Annual Savings
Maintenance once in each 2 years
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$81000
$4500
5 cm
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