Problem 3: Your company is environmentally conscious and is considering two heating options for a new buildings. What you know about each option is below, and your company will use an annual interest rate (MARR) of 7% for this decision. 1. Gas heating option: the initial equipment and installment of the natural gas system would cost OMR 83,000 right now. The maintenance costs of the equipment are expected to be OMR 730 per year, starting next year, for each of the next 20 years. The energy cost is expected to be OMR 1840 starting next year and is expected to raise by 7% per year for each of the next 20 years due to the price of the natural gas. 2. Geothermal heating option: because of green energy incentives provided by the government, the geothermal equipment and installation are expected to cost only OMR 72,000 right now, which is cheaper than the gas lines. There would be no energy cost with geothermal, but because this is relatively newer technology the maintenance is expected to be OMR 3680 per year, starting next year, for each of the next 20 years. Which is the lower cost option for the company? Use the present worth method.

Problem 3: Your company is environmentally conscious and is considering two heating options for a new buildings. What you know about each option is below, and your company will use an annual interest rate (MARR) of 7% for this decision. 1. Gas heating option: the initial equipment and installment of the natural gas system would cost OMR 83,000 right now. The maintenance costs of the equipment are expected to be OMR 730 per year, starting next year, for each of the next 20 years. The energy cost is expected to be OMR 1840 starting next year and is expected to raise by 7% per year for each of the next 20 years due to the price of the natural gas. 2. Geothermal heating option: because of green energy incentives provided by the government, the geothermal equipment and installation are expected to cost only OMR 72,000 right now, which is cheaper than the gas lines. There would be no energy cost with geothermal, but because this is relatively newer technology the maintenance is expected to be OMR 3680 per year, starting next year, for each of the next 20 years. Which is the lower cost option for the company? Use the present worth method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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