What is the annual equivalent cost for each motor

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Reference no: EM13203434

A 100 horsepower ventilation blower is to be powered by an electric motor. Two motors have been proposed with the following cost and engineering data.

Motor A Motor B
First Cost $9,500 $7,200
Anticipated life 15 years 15 years
Salvage Value 0 0
Efficiency at half load 88% 80%
Efficiency at 0.75 load 94% 83%
Efficiency at full load 95% 85%
Hours per year at half load 2,500 2,500
Hours per year at 0.75 load 2,500 2,500
Hours per year at full load 3,000 3,000

Power cost per kwh is $0.14. Annual maintenance, taxes and insurance will be 2.5% of the initial cost.

a. What is the annual equivalent cost for each motor?

b. What is the IRR (Internal Rate of Return) on the incremental investment to select the more expensive motor?

Reference no: EM13203434

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