An electric utility is considering bids for the purchase, installation, and operation of decentralized battery storage systems. The table below provides details for the two bids received.**Questions:**a) Which is the most economical bid if the discount rate is 11%? Note that none of the batteries are expected to have a salvage value after 30 years of use. The actual expected service life is listed in the bid.b) Also, solve using the Net Present Worth (NPW) method to compare these two mutually exclusive plans.**Bid Details:**| | Bid A | Bid B ||--------------------------|--------|--------|| Equipment cost | $112,000 | $98,000 || Installation cost | $25,000 | $30,000 || Annual Inspection and Maintenance fee | $2,000 | $2,000 || Annual extra income taxes | 0 | $800 || Life | 40 years | 35 years || Salvage Value | 0 | 0 |

Given, An electric utility is taking bids There are two bids : Bid A and Bid B The data is as follows :The NPW of the two bids are calculated as follows : We get, Therefore, since the NPW of Bid B is lower than Bid A, Bid B is more economical than Bid A.

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An electric utility is taking bids for the purchase, installation, and operation of decentralized battery storage systems. The table below has some details for the two bids received. a) Which is the most economical bid if the rate is 11%. None of the batteries are expected to have a salvage value after 30 years of use. (Actual expected service life is listed in the bid) b) Also solve using NPW method to compare these two mutually exclusive plans

An electric utility is taking bids for the purchase, installation, and operation of decentralized battery storage systems. The table below has some details for the two bids received. a) Which is the most economical bid if the rate is 11%. None of the batteries are expected to have a salvage value after 30 years of use. (Actual expected service life is listed in the bid) b) Also solve using NPW method to compare these two mutually exclusive plans

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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