Determine which insulation should be purchased

Reference no: EM132200736

Question: Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either one inch thick, or two inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting office requires an 8%/yr/yr rate of return to justify capital expenditures. The insulation has a life expectancy of ten years. Determine which insulation (if any) should be purchased using a ranking present worth analysis.

Reference no: EM132200736

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