A company wants to renew its old natural gas fired boiler. According to the receivedprice offer, the new boiler is 400,000 TL in cash. The natural gas consumption of this boiler is 15m3/hour and the price of natural gas is 1.1 TL/m3. The annual real price escalation of natural gas is determined as 1%. The annual cost of the boiler operation and maintenance costs is 25,000 TL and the annual escalationvalue is 17%. By purchasing a new boiler, some of the costs of the old boiler will be saved. The old boiler has costs of 250,000 TL increasing by 15% annually. The new boiler will run for 6,000 hours a year. The annual discount rate is 24% and the annual inflation rate is 17%. Determine whether it is economically feasible to purchase the new boiler by using the annual worthmethod, taking into account the 10-year costs and savings. Use real ratesfor relevant parameters in calculations.
A company wants to renew its old natural gas fired boiler. According to the receivedprice offer, the new boiler is 400,000 TL in cash. The natural gas consumption of this boiler is 15m3/hour and the price of natural gas is 1.1 TL/m3. The annual real price escalation of natural gas is determined as 1%. The annual cost of the boiler operation and maintenance costs is 25,000 TL and the annual escalationvalue is 17%. By purchasing a new boiler, some of the costs of the old boiler will be saved. The old boiler has costs of 250,000 TL increasing by 15% annually. The new boiler will run for 6,000 hours a year. The annual discount rate is 24% and the annual inflation rate is 17%. Determine whether it is economically feasible to purchase the new boiler by using the annual worthmethod, taking into account the 10-year costs and savings. Use real ratesfor relevant parameters in calculations.
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