B. Sally McCarthy is an engineer for a new power plant. The plant can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. An analysis of the costs shows that the installed cost, with all controls, would be least for natural gas at $30,000; for fuel oil it would be $55,000; and for coal it would be $180,000. If natural gas is used rather than fuel oil, the annual fuel cost will increase by $7500. If coal is used rather than fuel oil, the annual fuel cost will be $15,000 per year less. Assuming 12% interest, a 20-year analysis period, and no salvage value, which is the most economical installation?

B. Sally McCarthy is an engineer for a new power plant. The plant can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. An analysis of the costs shows that the installed cost, with all controls, would be least for natural gas at $30,000; for fuel oil it would be $55,000; and for coal it would be $180,000. If natural gas is used rather than fuel oil, the annual fuel cost will increase by $7500. If coal is used rather than fuel oil, the annual fuel cost will be $15,000 per year less. Assuming 12% interest, a 20-year analysis period, and no salvage value, which is the most economical installation?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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