In: Economics
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!!
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
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