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Energy manager at the manufacturing facility is looking towards replacing aging low efficiency furnace unit that is used to heat the production floor. Two alternatives are being considered:
A. High-efficiency forced air natural gas furnace with a cost of $32,000 that will have a present value resale of $4,500 after 15 years,
B. Standard-efficiency natural gas furnace for $23,000 that will have a salvage value of $3,000 at the end of its 15 year life.
If the potential savings in terms of reduced natural gas bill for the facility are for option A): $9000 B): $7000
Find the best alternative using the lifecycle cost approach and the BCR (benefit-to-cost-ratio) method. Assume that facility uses a discount rate of 15%. Do they provide the same answer? Why?
Please state all assumptions
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