A consulting engineer is currently evaluating 4 different methods for conserving

Question

A consulting engineer is currently evaluating 4 different methods for conserving water at a wast power generation station operated by the US park service. Each method has a life of 20 years. Estimates of the costs, benefits , dis benefits,and costsavings are shown.Using Net Benefits Cost evaluation method,calculate and report the B/C economic measure for each method and extensions of this method for competing alternatives using an interest rate of 10% per year. Based on your analysis identify which of the method if any should be recommended.

                                                                                   Lowet                 MiniH2O     Litulwet          Wetstop                    

Purchase cost $                                                      1,000,000            800,000           2,000,000      1,400,000

equivalent annul worth of external benefits $         1,500,000             1,100,000         1,500,000       420,000

equivalent annul worth of external disbenefits $   600,000             100,000             200,000         310,000

annual water cost saving $                                     150,000           200,000             160,000         300,000

Explanation / Answer

Present Value of Annuity at rate 10% and 20 years = 8.51

Using external benefits method, Lowet is the best.

Using external disbenefits method(taken with negative sign as its a cost), MiniH2O is the best as it has lowest cost.

Using water cost saving, Wetstop is the best.

Using only the purchase costs, MiniH2O is the best as it has lowest costs.

Overall, MiniH2O seems to be the best as it has good equivalent external benefits (3rd best), lowest cost of external disbenefits, lowest purchase costs and also gives good water savings annually (2nd best).

Lowet MiniH2O Litulwet Wetstop Purchase cost $              (1,000,000)            (800,000)            (2,000,000)            (1,400,000) equivalent annul worth of external benefits $ 1,500,000 1,100,000 1,500,000 420,000 Present value of benefits using annuity factor of 8.51      12,770,345.58     9,364,920.09      12,770,345.58        3,575,696.76 Net present value      11,770,345.58     8,564,920.09      10,770,345.58        2,175,696.76 equivalent annul worth of external disbenefits $ 600,000 100,000 200,000 310,000 Present value of benefits using annuity factor of 8.51      (5,108,138.23)      (851,356.37)      (1,702,712.74)      (2,639,204.75) Net present value      (6,108,138.23) (1,651,356.37)      (3,702,712.74)      (4,039,204.75) annual water cost saving $    150,000 200,000 160,000 300,000 Present value of benefits using annuity factor of 8.51        1,277,034.56     1,702,712.74        1,362,170.20        2,554,069.12 Net present value            277,034.56        902,712.74         (637,829.80)        1,154,069.12

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.