A manufacturing company plans to replace an existing production line with a newer and more energy ecient model. The cost of acquisition and installation is $40,000. The new equipment will save 200,000 kWh of electricity consumption every year, while the production capacity remains unchanged. The cost of the electricity will be $0.1/kWh in the first year of operation and is expected to increase at the rate of 4% per year afterwards because of inflation. Assume that the equipment has a service life of five years and will be operated for 4,000 hours per year. Considering that the equipment has no salvage value, determine the equivalent dollar savings per each operating hour at i = 9%. A) $5.38
A manufacturing company plans to replace an existing production line with a newer and more energy ecient model. The cost of acquisition and installation is $40,000. The new equipment will save 200,000 kWh of electricity consumption every year, while the production capacity remains unchanged. The cost of the electricity will be $0.1/kWh in the first year of operation and is expected to increase at the rate of 4% per year afterwards because of inflation. Assume that the equipment has a service life of five years and will be operated for 4,000 hours per year. Considering that the equipment has no salvage value, determine the equivalent dollar savings per each operating hour at i = 9%.
A) $5.38
B) $2.81
C) $2.43
D) Answers A, B and C are not correct.
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