Tha over a four-year period. A kilowatt hour of electrici y costs $ 13, and the

Question

Tha over a four-year period. A kilowatt hour of electrici y costs $ 13, and the company uses a MARR of 13% per year in its economic evaluations of refurbished systems. The market value of the system will be $10,000 at the end four years, and additional annual operating and maintenance expenses are nogligible. Use the bonefit-cost method to make a recommendation. Click the con to v ew the interest and annuity lable for discrete compounding when the MARR is 13% per year. The benefit-cost ratio of the system with PW is-(Round to two decimal places.)

Explanation / Answer

B/C Ratio using PW = (PW of benefits-PW of Disbenefits)/(Initial cost+PW of operating cost-PW of salvage value) Cost of electricity saved each year = 340000*$0.13 = $     44,200.00 PW of the savings = 44200*2.9745 = $   131,472.90 Initial cost $   112,000.00 PW of salvage value = 10000*0.6133 = $       6,133.00 B/C ratio using PW = 131472/(112000-6133) = 1.24 ACCORDING TO THE B-C RATIO METHOD, THE PROJECT IS ACCEPTABLE. The reason is that the ratio>1. Projects are to be rejected only if the ratio

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