Two advanced thermal insulating and anti-condensation protection alternatives ha

Question

Two advanced thermal insulating and anti-condensation protection alternatives have been proposed for new Antarctica marine vessels subject to the harsh marine environment. One alternative must be selected. Estimated savings from reduced total installation and maintenance costs over conventional insulation are the following:

Alternative Delta-T Alpha-B Installed cost $44,000 $46,000 Annual savings $3750 $5250 Life, years 7 7

Which alternative should be recommended based on the present worth method and an actual-dollar analysis? Use an inflation-free MARR of 8%, an inflation rate of 8% per year, and a study period of 7 years. assume negligible salvage values.

Explanation / Answer

net MARR = 8+8 = 16%

PVIFA(r,n) = [1-(1+r)^-n]/r

NPV Delta-T = -44000+3750*PVIFA(16,7) = -44000+3750*4.0386 = -$28,855.25

NPV alpha-B = -46000+5250*PVIFA(16,7) = -46000+5250*4.0386 = -$24,797.35

alpha-B should be chosen

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