Purchased using ranking present worth analysis

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Reference no: EM131989798

Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $2.00 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 79 % of the loss and will cost $0.25 per foot. A 2-inch thick insulated covering will eliminate 92 % of the loss and will cost $0.90 per foot. PCCC Physical Plant Services estimates that there are 220,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10.5 %/year return to justify capital expenditures. The insulation has a life expectancy of 10 years.

What is the present worth of each option?

No insulation: $______

1-inch insulation: $______

2-inch insulation: $______

Which insulation (if any) should be purchased using a ranking present worth analysis?

Reference no: EM131989798

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