You are investigating two options for refrigeration and air conditioner in your

Question

You are investigating two options for refrigeration and air conditioner in your company's office building. The pertinent forecast cost are Summarized in the table below, Perform a future value analysis or the choices and recommend one of the options. Use an interest rate of 9 percentage. Round your answers to the nearer dollar. a) What is the appropriate time frame for this at b) Find the future worth of the absorption chilling option an the compression chilling option. C) Base on two options, option should you choose and why?

Explanation / Answer

Calculation of Cash flow of absorption chilling Year Cash flow(in $) PVAF 9% Net cash flow($) 0 -60000 1 -60000 1 -40000 0.9174 -36697.24771 2 -40000 0.8417 -33667.19973 3 -40000 0.7722 -30887.3392 4 -40000 0.7084 -28337.00844 5 -40000 0.6499 -25997.25545 6 -40000 0.5963 -23850.69308 6 10000 0.5963 5963 net cash flow -233473.7436 Equivelent cash flow=-233473.7436/4.4859 52046.13 Calculation of Cash flow of compression chilling Year Cash flow(in $) PVAF 9% Net cash flow($) 0 -80000 1 -80000 1 -32000 0.9174 -29357.7982 2 -32000 0.8417 -26933.7598 3 -32000 0.7722 -24709.8714 4 -32000 0.7084 -22669.6068 5 -32000 0.6499 -20797.8044 6 -32000 0.5963 -19080.5545 7 -32000 0.5470 -17505.0958 8 -32000 0.5019 -16059.7209 9 -32000 0.4604 -14733.6889 Net cash flow -271847.9006 Equivelent Cash Flow= -271847.9006/5.9952 45344.26

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