In September 2015, a 3.45 megawatt cooling, heating, and power (CHP) system was

Question

In September 2015, a 3.45 megawatt cooling, heating, and power (CHP) system was placed in into operation for Southeast Regional Hospital with 360 beds. The CHP system was part of a new 20,000 sq. ft. central utility plant that provided the 800,000 sq. ft. health-care facility with cooling, heating and power. By centralizing all of the utilities in one location, the hospital accrued significant energy savings, as well as improved maintenance efficiency. The financial facts related to the project are summarized as Installed cost: $2.3 million Annual energy cost savings: S784,000 Annual O&M; costs: $218,000 Project service life: 14 years Salvage value: $190,000 At an interest rate of 12%, what is the net savings per dollar invested? Click the icon to view the interest factors for discrete compounding when i= 12% per year. The net savings per dollar invested is(Round to the nearest cent)

Explanation / Answer

Annual Net savings ($) = Energy cost savings - O&M costs = 784,000 - 218,000 = 566,000

Present Worth (PW) of net savings = 566,000 x P/A(12%, 14) + 190,000 x P/F(12%, 14)

= 566,000 x 6.6282 + 190,000 x 0.2046 = 3,751,561 + 3,874 = 3,790,435

Net savings per dollar invested = PW of net savings / Installed cost = $3,790,435 / $2,300,000 = $1.65

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