A remotely located air sampling station can be powered by solar cells or by running an above ground electric line to the site and using conventional power. Solar cells will cost RM 15,000 to install and will have a useful life of 5 years with no salvage value. Annual costs for inspection, cleaning, maintenance and part replacement are expected to be RM 4,000. A new power line will cost RM 40,000 to install, with power costs expected to be RM 1,000 per year. Since the air sampling project will end in 10 years,the salvage value of the line is considered to be zero. At an interest rate of 6% per year compounded monthly,(i) Calculate the effective interest rate per year(ii) Determine which alternative should be selected on the basis of an present worth analysis(iii) Determine the initial cost of the above ground line to make the two alternatives equally attractive economically
A remotely located air sampling station can be powered by solar cells or by running an above ground electric line to the site and using conventional power. Solar cells will cost RM 15,000 to install and will have a useful life of 5 years with no salvage value. Annual costs for inspection, cleaning, maintenance and part replacement are expected to be RM 4,000. A new power line will cost RM 40,000 to install, with power costs expected to be RM 1,000 per year. Since the air sampling project will end in 10 years,
the salvage value of the line is considered to be zero. At an interest rate of 6% per year compounded monthly,
(i) Calculate the effective interest rate per year
(ii) Determine which alternative should be selected on the basis of an present worth analysis
(iii) Determine the initial cost of the above ground line to make the two alternatives equally attractive economically
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