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

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!!

Solutions

Expert Solution

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

If there is any doubt please ask in comments

Thank you please rate

Rahul Sunny answered 9 months ago
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