You have been assigned the task of selecting a motor for a pump. You narrow your

Question

You have been assigned the task of selecting a motor for a pump. You narrow your choice to two motors that are rated at 1.5 kW. Additional information collected is shown in an accompanying table. The pump is expected to run 4200 hours every year. The average cost of electricity is 11 cents per kWh. Based on the information given here, which one of the motors will you recommend to be purchased (Assume an interest rate of 8% and no salvage value)? (Please explain and show all calculations)

Motor X Motor Y Expected Useful Life 5 years 5 years Initial Cost $300.00 $400.00 Efficiency at the Operating Point 0.75 0.85 Estimated Maintenance Cost $12 per year $10 per year

Explanation / Answer

motor x  

electricity cost per year = (1.5 * 4200 / efficency )11 cents = $924   

so in five years = $924*5 = $4620

maintainance cost =   12*5 = 60

Intial cost = 300.00    in five years with interest 300+ (300*8/100) * 5 = $420

total = 924 +60+420 =$ 1404      

motor y

electricity cost per year = (1.5 * 4200 / efficency )11 cents = $815.29

so in five years = $924*5 = $4076

maintainance cost =   10*5 = 50

Intial cost = 400.00    in five years with interest 400+160 = $560

$1425

so cost wise it is better to choose motor x

total = 924 +60+420 = 1404     

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