Compute the mean life and determine the net present worth

Reference no: EM13213012

A heat exchanger is being installed as part of a plant modernization program. It costs $80,000, including installation, and is expected to reduce the overall plant fuel cost by $20,000 per year. Estimates of the useful life of the heat exchanger range from an optimistic 12 years to a pessimistic 4 years. The most likely value is 5 years. Assume the heat exchanger has no salvage value at the end of its useful life. Interest rate is 10%. Use the range of estimates to compute the mean life and determine the net present worth (NPW).

Reference no: EM13213012

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