An electrical energy audit indicates electrical motor consumption is 4 x 106 kWh per year. By upgrading the motor spares with high efficiency motors a 10% savings can be realized. The additional cost for these motors is estimated at $80,000. Assuming an 8 cents per kWh energy charge and 20-year life, is the expenditure justified based on a minimum rate of return of 20% before taxes? Solve the problem using the present worth, annual cost, and payback methods.

An electrical energy audit indicates electrical motor consumption is 4 x 106 kWh per year. By upgrading the motor spares with high efficiency motors a 10% savings can be realized. The additional cost for these motors is estimated at $80,000. Assuming an 8 cents per kWh energy charge and 20-year life, is the expenditure justified based on a minimum rate of return of 20% before taxes? Solve the problem using the present worth, annual cost, and payback methods.

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

An electrical energy audit indicates electrical motor consumption is 4 x 106 kWh per
year. By upgrading the motor spares with high efficiency motors a 10% savings can be
realized. The additional cost for these motors is estimated at $80,000. Assuming an 8
cents per kWh energy charge and 20-year life, is the expenditure justified based on a
minimum rate of return of 20% before taxes? Solve the problem using the present
worth, annual cost, and payback methods.

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