Present worth-equivalent uniform annual cost analysis

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1. An energy manager has $5000 available to purchase a high efficiency air conditioner that has a life of 6 years. The manager would like to know what should be the energy cost savings needed each year to justify the purchase (a) if the interest rate is 10%, and (b) if the interest rate is 3%.

2. An energy manager expects a need for a boiler that costs $150,000 in about seven years. How much money should the manager save each year to have enough money for the purchase in seven years time if the interest rate is (a) 10% and (b) 3%.

3. Currently a heating unit for a small building is very old and inefficient. The owner is contemplating on replacing it with a variable air volume system that costs $100,000 and will save 450,000 kWh each year. The cost of electricity is $0.06 per kWh. The life expectancy of the new unit is 10 years and will have a salvage value of $500. If the interest rate is 10% will the new system be cost effective. Base your decision on the (a) present worth analysis and (b) equivalent uniform annual cost analysis.

4. For the situation listed in Q3 above, what is the rate of return (ROR) or Return on investment (ROI). Based on your finding propose whether the purchase is worth it or not.

Reference no: EM13999868

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