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 |
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 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 :-
Now Annual Worth = Present Worth / PVAF ( r , n )
Now Annual Worth , In Case of Thichness 2 cm
Annual Worth = $205,447.2 / PVAF ( 9% , 8 )
= $205,447.2 / 5.535
= $37,119.05
Annual Worth , Thickness 5 cm = $221,119.1 / PVAF ( 9% , 7 )
= $221,119.1 / 5.033
= $43,934.27
Choose Option of Thickness 5 cm , as it has high annual worth
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