Question

In: Economics

Hello, I'm confused on part 'C' on how to graph the answer I received in part...

Hello, I'm confused on part 'C' on how to graph the answer I received in part 'B'

B. A steam boiler is required as part of the design of a new plant. The types of fuel that can be used to ignite the boiler are natural gas, fuel oil, and coal. The cost of installation including all required controls is $40,000 for natural gas, $50,000 for fuel oil, and $120,000 for coal. In addition, the annual cost of fuel oil is $8,000 less than the annual cost of natural gas and $12,000 more than the annual cost of coal. The boiler is to be utilized for 20 years and interest rate is 8%. Using the most suitable approach, determine the best alternative. Is there any other consideration for the obtained result?

Present Worth of Costs:

            Natural Gas:

                        PWC: 40,000 + 8,000 (P/A, 8%, 20) + PWC(OIL)

                        PWC: 40,000 + 8,000 * 9.8181 + PWC(OIL)

                        PWC: 78,544.80 + 40,000 + PWC(OIL)

                        PWC: 118,544.80 + PWC(OIL)

            Fuel Oil:

                        PWC = 50,000 + PWC(OIL)

           

            Coal:

                        PWC = 120,000 – 12,000(P/A, 8%,20) + PWC(OIL)

                        PWC = 120,000 – 12,000 * 9.8181 + PWC(OIL)

                        PWC = 120,000 – 117,817.20 + PWC(OIL)

                        PWC = $2,182.80

The best alternative to ignite the boiler is coal. There are not other issues to be considered to obtain results.

C. Using Excel software or any other software package, solve the problem of Part B. Include all required command statements/programming as part of your solution.

Solutions

Expert Solution

initial cost for fuel oil= $ 40,000

initial cost for natural gas =$ 50,000

initial cost for coal =$ 120,000

boiler is to be utilized for 20 years and interest rate is 8%.

, the annual cost of fuel oil is $8,000 less than the annual cost of natural gas and $12,000 more than the annual cost of coal

Best fuel alternative for use in boiler would be one with least EUAC ( equivalent uniform annual cost)

It is quite evident coal has the lowest EUAC

formula used

           5,000            9,076          18,095            5,228
         10,000          14,076          23,095          10,228
         15,000          19,076          28,095          15,228
         20,000          24,076          33,095          20,228
         25,000          29,076          38,095          25,228


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