small heat pump now costs $2,500 to purchase and install. It has a projected useful life of years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at %4 per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of %9. The firm's MARR, which includes an allowance for general price inflation, is %18 per year (im). No market value is expected from the heat pump at the end of the 12 years of service life. a. What is the PW of owning and operating the heat pump? The PW is $-------- enter your response here. (Round to the nearest dollar.) b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump? The AW is $------- enter your response here. (Round to the nearest dollar.) (ii) What is the AW in real dollars of owning and operating the heat pump? The AW is $------ enter your response here. (Round to the nearest dollar.)

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

A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at %4 per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of %9. The firm's MARR, which includes an allowance for general price inflation, is %18 per year (im). No market value is expected from the heat pump at the end of the 12 years of service life.

a. What is the PW of owning and operating the heat pump?
The PW is $-------- enter your response here. (Round to the nearest dollar.)
b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump?
The AW is $------- enter your response here. (Round to the nearest dollar.)
(ii) What is the AW in real dollars of owning and operating the heat pump?
The AW is $------ enter your response here. (Round to the nearest dollar.)

A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of 12 years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at 4% per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of 9%. The firm’s MARR, which includes an allowance for general price inflation, is 18% per year (i_m). No market value is expected from the heat pump at the end of the 12 years of service life.

Interactive element:
- Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year.

Questions:
a. What is the PW of owning and operating the heat pump?
The PW is $______. (Round to the nearest dollar.)

b.
(i) What is the AW, expressed in actual dollars, of owning and operating the heat pump?
The AW is $______. (Round to the nearest dollar.)

(ii) What is the AW in real dollars of owning and operating the heat pump?
The AW is $______. (Round to the nearest dollar.)

# Discrete Compounding Table at 18% Interest

This table provides various financial factors used for calculations in engineering economics, specifically dealing with discrete compounding at an interest rate of 18%. The factors are essential for determining future value, present value, and annuities in financial planning and analysis scenarios.

## Table Overview

### Categories

1. **Single Payment Factors**
- **Compound Amount Factor (F/P):** Used to find the future value (F) given a present value (P).
- **Present Worth Factor (P/F):** Used to find the present value (P) given a future value (F).

2. **Uniform Series Factors**
- **Compound Amount Factor (F/A):** Used to find the future value (F) given a series of equal payments (A).
- **Present Worth Factor (P/A):** Used to find the present value (P) given a series of equal payments (A).
- **Sinking Fund Factor (A/F):** Used to determine the periodic payment (A) required to accumulate a future amount (F).
- **Capital Recovery Factor (A/P):** Used to determine the periodic payment (A) required to recover a given present amount (P).

### Table Contents

Each row corresponds to a specific period (N) ranging from 1 to 20. The columns contain the factors for the specified financial calculations.

#### Example:
- For **N = 1**:
- F/P = 1.1800
- P/F = 0.8475
- F/A = 1.0000
- P/A = 0.8475
- A/F = 1.0000
- A/P = 1.1800

This table is a vital reference for calculating and understanding the time value of money in various financial contexts such as loans, investments, and asset management.

Understanding how to use these factors allows for better financial decision-making and planning.

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