Present worth on incremental investment

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Reference no: EM13689465

It is estimated that the annual heat-loss cost in a small power plant is $5,200. Two mutually exclusive proposals have been formulated that will reduce the loss. Proposal A will reduce heat loss by 60% and cost $3,000. Proposal B will reduce heat loss by 55% and cost $2,500. If the interest rate is 8% and the plant will benefit from the reduction in heat loss for ten years, using the present worth on incremental investment, which proposal should be accepted?

Reference no: EM13689465

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