A remotely located air sampling station can be powered by solar cells or by runn
ID: 1138732 • Letter: A
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 $7,500 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 $1,650. A new power line will cost $14,500 to install, with power costs expected to be $1,350 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 9% 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) Solar cells Electric line should be selected on the basis of a future worth analysis.
Explanation / Answer
The future worth of solar cells = 7500(F/P, 9%, 4) + 1650(F/A, 9%, 4)
= 7500(1.412) + 1650(4.573)
= 10,590 + 7,545.45
= $18,135.45
The future worth of electric line = 14,500(F/P, 9%, 4) + 1350(F/A, 9%, 4)
= 14,500(1.412) + 1350(4.573)
= 20,474 + 6,173.55
= $26,647.55
Thus, The future worth of solar cells is $18,135.45 and that of electric line is $26,647.55.
Since the future worth of solar cell is less than electric line, therefore, Solar cells should be selected on the basis of a future worth analysis.
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