1. DEWA has t wo renewal energy altern alternative are given below. Use the conv
ID: 2792570 • Letter: 1
Question
1. DEWA has t wo renewal energy altern alternative are given below. Use the conventional B-C Worth as the equivalent-worth deter selected at an interest rate of 10% per year over a 25-year study atives are available for providing energy at a cility. The cash flow estimates associated with each B-Cratio method, with Annual measure, to determine which alternative should be alternative must be selected period. One Initial cost, $ Annual maintenance costs, $/yr $380,000 Annual benefits, S/yr AlternativeI Alternative II 1,000,000 990,000 359,500 $459,500 $15,800 Salvage value, S $500,000 $17,000 a) Benefit Cost Analysis for Alternative I option: b) Benefit Cost Analysis for Alternative II option: c) Incremental Benefit Cost Analysis:Explanation / Answer
Statement showing annual worth of both alternatives
Incremental approach
Thus alternative 1 should be selected
Particulars Alternative 1 Alternative 2 PV of salvage value 17000*PVIF(10%,25years)17000*0.0923 1569.1 15800*PVIF(10%,25years)
15800*0.0923 1458.34 Initial Cost -1000000 -990000 a PV of cash flow -998430.9 -988541.66 b Capital recovery factor
1/PVIFA(10%,25 years)
1/9.0770 0.11017 0.11017 c EAUC(a*b) -109997.1323 -108907.6347 d Annual maintenance cost -380000 -359500 e Annaul benefit 500000 459500 Annual worth(c+d+e) 10002.9 -8907.6
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