a. The PW of the Gas Heating Option isb. The PW of the Geothermal Heating Option isc. The lower cost alternative is the geothermal heating option Your company is environmentally conscious and is considering two heating options for a new research building. What you know about eachoption is below, and your company will use an annual interest rate (MARR) of 10% for this decision. Which is the lower cost option for thecompany?Click the icon to view the additional information about the options.Click the icon to view the interest and annuity table for discrete compounding when the MARR is 5% per year.Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year......The PW of the Gas Heating Option is $(Round to the nearest dollar.)More infoGas Heating Option: The initial equipment and installment of the natural gas system would cost $210,000right now. The maintenance costs of the equipment are expected to be $2,000 per year, starting next year,for each of the next 18 years. The energy cost is expected to be $4,000 starting next year and is expectedto rise by 5% per year for each of the next 18 years due to the price of natural gas increasing.Geothermal Heating Option: Because of green energy incentives provided by the government, thegeothermal equipment and installation are expected to cost only $170,000 right now, which is cheaper thanthe gas lines. There would be no energy cost with geothermal, but because this is a relatively newertechnology the maintenance is expected to be $15,000 per year, staring next year, for each of the next 20years.

Answered: a. The PW of the Gas Heating Option is…

a. The PW of the Gas Heating Option is b. The PW of the Geothermal Heating Option is c. The lower cost alternative is the geothermal heating option

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

a. The PW of the Gas Heating Option is

b. The PW of the Geothermal Heating Option is

c. The lower cost alternative is the geothermal heating option

Your company is environmentally conscious and is considering two heating options for a new research building. What you know about each
option is below, and your company will use an annual interest rate (MARR) of 10% for this decision. Which is the lower cost option for the
company?
Click the icon to view the additional information about the options.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 5% per year.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year.
.....
The PW of the Gas Heating Option is $
(Round to the nearest dollar.)
More info
Gas Heating Option: The initial equipment and installment of the natural gas system would cost $210,000
right now. The maintenance costs of the equipment are expected to be $2,000 per year, starting next year,
for each of the next 18 years. The energy cost is expected to be $4,000 starting next year and is expected
to rise by 5% per year for each of the next 18 years due to the price of natural gas increasing.
Geothermal Heating Option: Because of green energy incentives provided by the government, the
geothermal equipment and installation are expected to cost only $170,000 right now, which is cheaper than
the gas lines. There would be no energy cost with geothermal, but because this is a relatively newer
technology the maintenance is expected to be $15,000 per year, staring next year, for each of the next 20
years.

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