Question
In: Economics
You have a process with the following parameters. What is the EUAW (EUAB-EUAC) for the process,...
You have a process with the following parameters. What is the
EUAW (EUAB-EUAC) for the process, given a 15% interest rate?
First cost: $1.7M
O&M costs for Year 1: $29,000
Cost gradient: +$750/year (Year 2 is 29,750; year 3 is 30,500,
and so forth)
Annual benefit: $303,000
Salvage value: $210,000
Useful life, in years: 20
Solutions
Expert Solution
EUAB = 303000
EUAC = 1700000*(A/P,15%,20) + 29000 + 750*(A/G,15%,20) - 210000*(A/F,15%,20)
= 1700000*0.159761 + 29000 + 750*5.365137 - 210000*0.009761
= 302567.74
EUAW = EUAB - EUAC = 303000 - 302567.74 = 432.26 ~ 432
Using Excel
| Investment | O&M cost | Annual Benefit | Salvage | Net Cash flow | |
| 0 | -17,00,000.00 | -17,00,000.00 | |||
| 1 | -29,000.00 | 3,03,000.00 | 2,74,000.00 | ||
| 2 | -29,750.00 | 3,03,000.00 | 2,73,250.00 | ||
| 3 | -30,500.00 | 3,03,000.00 | 2,72,500.00 | ||
| 4 | -31,250.00 | 3,03,000.00 | 2,71,750.00 | ||
| 5 | -32,000.00 | 3,03,000.00 | 2,71,000.00 | ||
| 6 | -32,750.00 | 3,03,000.00 | 2,70,250.00 | ||
| 7 | -33,500.00 | 3,03,000.00 | 2,69,500.00 | ||
| 8 | -34,250.00 | 3,03,000.00 | 2,68,750.00 | ||
| 9 | -35,000.00 | 3,03,000.00 | 2,68,000.00 | ||
| 10 | -35,750.00 | 3,03,000.00 | 2,67,250.00 | ||
| 11 | -36,500.00 | 3,03,000.00 | 2,66,500.00 | ||
| 12 | -37,250.00 | 3,03,000.00 | 2,65,750.00 | ||
| 13 | -38,000.00 | 3,03,000.00 | 2,65,000.00 | ||
| 14 | -38,750.00 | 3,03,000.00 | 2,64,250.00 | ||
| 15 | -39,500.00 | 3,03,000.00 | 2,63,500.00 | ||
| 16 | -40,250.00 | 3,03,000.00 | 2,62,750.00 | ||
| 17 | -41,000.00 | 3,03,000.00 | 2,62,000.00 | ||
| 18 | -41,750.00 | 3,03,000.00 | 2,61,250.00 | ||
| 19 | -42,500.00 | 3,03,000.00 | 2,60,500.00 | ||
| 20 | -43,250.00 | 3,03,000.00 | 2,10,000.00 | 4,69,750.00 | |
| NPW | 2,701.25 | ||||
| AW | 431.56 |
Showing formula in Excel
| Investment | O&M cost | Annual Benefit | Salvage | Net Cash flow | |
| 0 | -1700000 | =N8+O8+P8+Q8 | |||
| 1 | -29000 | 303000 | =N9+O9+P9+Q9 | ||
| 2 | =O9-750 | 303000 | =N10+O10+P10+Q10 | ||
| 3 | =O10-750 | 303000 | =N11+O11+P11+Q11 | ||
| 4 | =O11-750 | 303000 | =N12+O12+P12+Q12 | ||
| 5 | =O12-750 | 303000 | =N13+O13+P13+Q13 | ||
| 6 | =O13-750 | 303000 | =N14+O14+P14+Q14 | ||
| 7 | =O14-750 | 303000 | =N15+O15+P15+Q15 | ||
| 8 | =O15-750 | 303000 | =N16+O16+P16+Q16 | ||
| 9 | =O16-750 | 303000 | =N17+O17+P17+Q17 | ||
| 10 | =O17-750 | 303000 | =N18+O18+P18+Q18 | ||
| 11 | =O18-750 | 303000 | =N19+O19+P19+Q19 | ||
| 12 | =O19-750 | 303000 | =N20+O20+P20+Q20 | ||
| 13 | =O20-750 | 303000 | =N21+O21+P21+Q21 | ||
| 14 | =O21-750 | 303000 | =N22+O22+P22+Q22 | ||
| 15 | =O22-750 | 303000 | =N23+O23+P23+Q23 | ||
| 16 | =O23-750 | 303000 | =N24+O24+P24+Q24 | ||
| 17 | =O24-750 | 303000 | =N25+O25+P25+Q25 | ||
| 18 | =O25-750 | 303000 | =N26+O26+P26+Q26 | ||
| 19 | =O26-750 | 303000 | =N27+O27+P27+Q27 | ||
| 20 | =O27-750 | 303000 | 210000 | =N28+O28+P28+Q28 | |
| NPW | =NPV(15%,R9:R28)+R8 | ||||
| AW | =PMT(15%,20,-R29) |
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