A remotely located air sampling station can be powered by solar cells or by runn

Question

A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $9,500 to install and will have a useful life of 4 years with no salvage value. Annual costs for inspection, cleaning, etc. are expected to be $1,850. A new power line will cost $16,500 to install, with power costs expected to be $750 per year. Since the air sampling project will end in 4 years, the salvage value of the line is considered to be zero. At an interest rate of 13% per year, which alternative should be selected on the basis of a future worth analysis? The future worth of solar cells is $ and that of electric line is $ (Click to select) ould be selected on the basis of a future worth analysis. Solar cells Electric line

Explanation / Answer

Answer
FW=C*(1+i)^n+A*(F|A,i,n)
C=first cost
A=annual cost

FW of Solar cells=9500*(1.13^4)+1850*(P|F,13,4)
=9500*(1.13^4)+1850*4.84979699
=24461.6237
FW of Electric line=16500*(1.13^4)+750*4.84979699
=30540.1623
The Future value of the cost of Solar cells is lower so it should be selected

Note: the answer may be filled in negative if its stated in your class as this denotes costs

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