Two types of power converters are under consideration for a specific application
ID: 1227533 • Letter: T
Question
Two types of power converters are under consideration for a specific application. An economic comparison is to be made using a MARR of 20% and the following cost estimates: Data Alternative Alpha Beta Service Life(Years) 5 9 First Cost $10,000 $20,000 Salvage Value 0 5,000 Annual Operating Cost $2, 500 $1, 200 Compute the equivalent annual costs of each alternative and recommend the economically superior alternative. Determine a salvage value for the Beta system such that the Beta system will have an equivalent uniform annual cost equal to the Alpha system.Explanation / Answer
a)
present cost of alpha for 5 years
= 10000 +2500(1+1/1.2+1/1.2^2...1/1.2^4) =18971.84
present cost of beta for 5 years
first cost =20000*5/9 =11111.1
present cost 11111.1 +1200(1+1/1.2+1/1.2^2...1/1.2^4) -5000/1.2^5 = 13408
hence B system is superior system
b)
EUACALPHA = - 10,000 (A/P,i=20%,N=5) - 2,500
EUACALPHA = - 10,000 (0.3344) - 2,500
EUACALPHA = - 3,344 - 2,500 = 5,844
EUACBETA = - 20,000 (A/P,i=20%,N=9) - 1,200 + SalvageValue (A/F,i=20%,N=9)
5,844 = - 20,000 (A/P,i=20%,N=9) - 1,200 + SalvageValue (A/F,i=20%,N=9)
5,844 = - 20,000 (0.2481) - 1,200 + SalvageValue (0.0481)
5,844 = - 4,962 - 1,200 + SalvageValue (0.0481)
5,844 + 4,962 + 1,200 = SalvageValue (0.0481)
12,006 = SalvageValue (0.0481)
SalvageValue = 12,006 / 0.0481
SalvageValue = 249,605
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