9. Two types of power converters are under consideration for a specific applicat

Question

9. 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 Alternative AlphaBeta $10,000 $20,000 Data Service Life (Years) First Cost Salvage Value Annual Operating Cost$2,500 5,000 $1,200 0 (a). Compute the equivalent annual costs of each alternative and recommend the economically superior alternative. (b). 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

Alpha Beta (a) Annual Worth of First cost: = 10000*0.20*1.20^5/(1.20^5-1) = $ 3,343.80 = 20000*0.20*1.20^9/(1.20^9-1) = $    4,961.59 AW of salvage value: $               -   = 5000*0.20/(1.20^9-1) = $      -240.40 Annual operating cost $ 2,500.00 $    1,200.00 Equivalent annual cost $ 5,843.80 $    5,921.19 (b) For Beta to have the same uniform annual cost, the AW of its salvage value should be 1200+4961.59-5843.80 = $       317.79 Hence, Salvage value should be 317.79*(1.20^9-1)/0.20 = $    6,609.68 CHECK: Alpha Beta Annual Worth of First cost: = 10000*0.20*1.20^5/(1.20^5-1) = $ 3,343.80 = 20000*0.20*1.20^9/(1.20^9-1) = $    4,961.59 AW of salvage value: $               -   = 6609.68*0.20/(1.20^9-1) = $      -317.79 Annual operating cost $ 2,500.00 $    1,200.00 Equivalent annual cost $ 5,843.80 $    5,843.80

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