A 3.45 megawatt cooling, heating, and power (CHP) system was placed into operati

Question

A 3.45 megawatt cooling, heating, and power (CHP) system was placed into operation for Southeast Regional Hospital with 360 beds. The CHP system was part of a new 20,000 sq. ft. central utility plant that provided the 800,000 sq. ft. health-care facility with cooling, heating, and power. By centralizing all of the utilities in one location, the hospital accrued significant energy savings, as well as improved maintenance efficiency. The financial facts related to the project are summarized as follows:
Installed cost: $2.6 million
Annual energy cost savings: $718,000
Annual O&M costs: $322,000
Project service life: 13 years
Salvage value: $260,000
At an interest rate of 7%, what is the net savings per dollar invested (rounded to the nearest hundreth)?"

Explanation / Answer

Savings per doller invested = 1.3144 USD

A B C D E F G H I 2 Formula One time cash flow Savings Cash flow(G+H) 3 Initial cost        2,600,000 Year 1 396,000              396,000 4 Annual savings            718,000 year 2 396,000              396,000 5 O& M cost            322,000 Year 3 396,000              396,000 6 Net savings            396,000 C4-C5 Year 4 396,000              396,000 7 Project life                     13 Year 5 396,000              396,000 8 Salvage value            260,000 Year 6 396,000              396,000 9 Year 7 396,000              396,000 10 Rate of return 7% Year 8 396,000              396,000 11 Year 9 396,000              396,000 12 NPV of savings $3,417,520 NPV(C10, I3:I15) Year 10 396,000              396,000 13 Year 11 396,000              396,000 14 Savings per doller of investment $1.3144 C12/C3 Year 12 396,000              396,000 15 Year 13           260,000 396,000              656,000

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