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

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 Analysis and Annual Worth Analysis? (Use repeatability assumption)

IN EXCEL PLZ!!

Solutions

Expert Solution

Solution :-

On the basis of Present Worth Analysis Choose 5 cm thickness .

(ii)

Now Annual Worth = Present Worth / PVAF ( r , n )

Thickness 2 cm = $205,447.2 / PVAF ( 9% , 8 )

= $205,447.2 / 5.535

= $37,119.05

Thickness 5 cm = $283,852.4 / PVAF ( 9% , 8 )

= $283,852.4 / 5.535

= $51,284.85

On the basis of Annual Worth Analysis Choose 5 cm thickness

If there is any doubt please ask in comments

Thank you please rate

Rahul Sunny answered 8 months ago
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