A retrofitted heating system is being considered for a small office building. The system can be purchased and installed for 94,000 and it will save an estimated 230,000 kWh ( KWH )of electric power each year over a six year period . A kilowatt hour of electricity cost $0.11 and the company uses a MARR of 18% per year in its economic evaluations or refurbished systems. The market value of the system will be $18,800 at the end of six years and additional operating and maintenance expenses are $10,300 per year . Use the benefit cost method to make a recommendation. ### Economic Analysis of a Retrofitted Space-Heating SystemA retrofitted space-heating system is being evaluated for a small office building. The costs and potential benefits are detailed as follows:- **Initial Cost:** $94,000 for purchase and installation.- **Duration:** Over a six-year period.- **Electricity Usage:** 230,000 kilowatt-hours (kWh) per year.- **Electricity Cost:** $0.11 per kWh.- **Market Value at End of Period:** $18,800.- **Annual Expenses:** $10,300.The company is using these metrics to conduct an economic evaluation of the system using the benefit-cost method. The goal is to determine if the investment is worthwhile.- **Benefit-Cost Ratio (B-C):** This metric will help ascertain if the project is economically viable and should be calculated to two decimal places.#### Steps for Analysis:1. **Interest and Annuity Table:** Click the provided icon to access the interest and annuity table for discrete compounding when the Minimum Attractive Rate of Return (MARR) is 18% per year.2. **Calculate the Conventional B-C Ratio:** Input the calculated value, which indicates whether the project is "acceptable" or "not acceptable."The dropdown menu allows you to select whether the B-C ratio concludes the project as viable or not.This framework provides a structured approach to assessing the financial feasibility of the heating system investment.

Finding the present value of all future cash projected within a given period, assuming a particular…

Answered: A retrofitted heating system is being…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A retrofitted heating system is being considered for a small office building. The system can be purchased and installed for 94,000 and it will save an estimated 230,000 kWh ( KWH )of electric power each year over a six year period . A kilowatt hour of electricity cost $0.11 and the company uses a MARR of 18% per year in its economic evaluations or refurbished systems. The market value of the system will be $18,800 at the end of six years and additional operating and maintenance expenses are $10,300 per year . Use the benefit cost method to make a recommendation.

### Economic Analysis of a Retrofitted Space-Heating System

A retrofitted space-heating system is being evaluated for a small office building. The costs and potential benefits are detailed as follows:

- **Initial Cost:** $94,000 for purchase and installation.
- **Duration:** Over a six-year period.
- **Electricity Usage:** 230,000 kilowatt-hours (kWh) per year.
- **Electricity Cost:** $0.11 per kWh.
- **Market Value at End of Period:** $18,800.
- **Annual Expenses:** $10,300.

The company is using these metrics to conduct an economic evaluation of the system using the benefit-cost method. The goal is to determine if the investment is worthwhile.

- **Benefit-Cost Ratio (B-C):** This metric will help ascertain if the project is economically viable and should be calculated to two decimal places.

#### Steps for Analysis:

1. **Interest and Annuity Table:** Click the provided icon to access the interest and annuity table for discrete compounding when the Minimum Attractive Rate of Return (MARR) is 18% per year.

2. **Calculate the Conventional B-C Ratio:** Input the calculated value, which indicates whether the project is "acceptable" or "not acceptable."

The dropdown menu allows you to select whether the B-C ratio concludes the project as viable or not.

This framework provides a structured approach to assessing the financial feasibility of the heating system investment.

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