The initial cost of a proposed heat recovery system is $375,000. The annual operation andmaintenance costs are projected to be $12,000. The salvage value of the system at the end of itsuseful life (projected to be 30 years) is $60,000. The annual savings in fuel costs resulting fromthis system are estimated to be $55,000 per year.a. Assuming annual compounding, determine the rate of return for this heat recovery system.b. If management has set the MARR to be 15% for a heat recovery system like this, what is themaximum initial cost that can be spent on the system (assuming that all other costs and incomesare the same)?

Refrigeration and Air Conditioning Technology (MindTap Course List)
8th Edition
ISBN:9781305578296
Author:John Tomczyk, Eugene Silberstein, Bill Whitman, Bill Johnson
Publisher:John Tomczyk, Eugene Silberstein, Bill Whitman, Bill Johnson
Chapter44: Geothermal Heat Pumps
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Problem 12RQ: The function of the pressure tank in an open-loop, geo-thermal heat pump well system is to prevent...
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The initial cost of a proposed heat recovery system is $375,000. The annual operation and
maintenance costs are projected to be $12,000. The salvage value of the system at the end of its
useful life (projected to be 30 years) is $60,000. The annual savings in fuel costs resulting from
this system are estimated to be $55,000 per year.
a. Assuming annual compounding, determine the rate of return for this heat recovery system.
b. If management has set the MARR to be 15% for a heat recovery system like this, what is the
maximum initial cost that can be spent on the system (assuming that all other costs and incomes
are the same)?

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