A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $142,000, and it will save an estimated 240,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.14, and the company uses a MARR of 12% per year in its economic evaluations of refurbished systems. The market value of the system will be $28,400 at the end of six years, and additional operating and maintenance expenses are $15,600 per year. Use the benefit-cost method to make a recommendation.
A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $142,000, and it will save an estimated 240,000 kilowatt-hours (kWh) of electric power each year over a six-year period. A kilowatt-hour of electricity costs $0.14, and the company uses a MARR of 12% per year in its economic evaluations of refurbished systems. The market value of the system will be $28,400 at the end of six years, and additional operating and maintenance expenses are $15,600 per year. Use the benefit-cost method to make a recommendation.
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 8P
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