simple, direct space heating system is currently being used in a professional medical office complex. An upgraded “variable air-volume system” retrofit can be purchased and installed for P5,200,000 (investment cost). Its power savings in the future will be 500,000 kilo-Watt hours per year over its estimated life of 8 years. The cost of electricity is P5.00 per kilo-Watt hour. If the firm’s cost of capital is 12% per year and the residual value of the system in 8 years is P800,000, should the new system be purchased? a. Use the Rate of Return Method b. Use the Present Worth Method
simple, direct space heating system is currently being used in a professional medical office complex. An upgraded “variable air-volume system” retrofit can be purchased and installed for P5,200,000 (investment cost). Its power savings in the future will be 500,000 kilo-Watt hours per year over its estimated life of 8 years. The cost of electricity is P5.00 per kilo-Watt hour. If the firm’s cost of capital is 12% per year and the residual value of the system in 8 years is P800,000, should the new system be purchased? a. Use the Rate of Return Method b. Use the Present Worth Method
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A simple, direct space heating system is currently being used in a professional medical office complex. An upgraded “variable air-volume system” retrofit can be purchased and installed for P5,200,000 (investment cost). Its power savings in the future will be 500,000 kilo-Watt hours per year over its estimated life of 8 years. The cost of electricity is P5.00 per kilo-Watt hour. If the firm’s cost of capital is 12% per year and the residual value of the system in 8 years is P800,000, should the new system be purchased?
a. Use the
b. Use the Present Worth Method
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