An outdoor swimming pool operates during the summer months in the Midwest for 14

Question

An outdoor swimming pool operates during the summer months in the Midwest for 14 weeks. Water in the pool is heated to maintain a constant temperature using a natural gas heater. An electric pump is used to circulate water in the pool and is used only when the heater is on. To reduce heat loss to the surroundings, the owner is contemplating installation of a pool blanket. Additional facts are:

Blanket cost: $310.00,   Yearly interest rate: 8 %

Tax bracket: 35 %,    Length of analysis: 12 years

Natural Gas Electricity

Savings, MBtu/yr 150.00 4.30

Price,    $/MBtu 3.00 30.75

Inflation rate, % 6 6

Efficiency, % 70 70

(The fuel prices do not include the efficiencies.)

Determine:

(A)Incremental capital costs,

(B)Values of annual fuel savings for natural gas and electricity and total annual fuel savings,

(C)Simple payback time, and

(D)Net present value of discounted profits.

Explanation / Answer

BLANKET COST=$310

YEARLY INTEREST=$310 * 8%=$24.8

SAVINGS IN NATURAL GAS=150 * $ 3=$450

IN ELECTRICITY= 4.30 * $ 30.75=$132.225

SAVINGS AFTER TAKING INTO ACCOUNT EFFICIENCY

IN NATURAL GAS= $450*70%=$315

IN ELECTRICITY=$132.225*70%=$92.56

YEAR 1 2 3 4 5 6 7 8 9 10 11 12 INTEREST AFTER INFLATION($) 24.8 26.29 27.87 29.54 31.31 33.19 35.18 37.29 39.53 41.90 44.41 47.07 SAVING IN NATURAL GAS($) AFTER INFLATION 315 333.9 353.93 375.17 397.68 421.54 446.83 473.64 502.06 532.18 564.11 597.96 SAVING IN ELECTRICITY($)AFTER INFLATION 92.56 98.11 104 110.24 116.85 123.86 131.29 139.17 147.52 156.37 165.75 175.7 INCREMENT IN INTEREST 1.49 1.58 1.67 1.77 1.88 1.99 2.11 2.24 2.37 2.51 2.66 INCREMENT IN SAVINGS IN NATURAL GAS

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