There will be an expansion project in Malampaya gas field. A steam boiler is needed as part of the design of a new this expansion. The boiler can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. A2BP, an American EPC company provided an analysis of the costs that shows 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 8% interest, a 20-year analysis period, and no salvage value, which is the most economical installation?

There will be an expansion project in Malampaya gas field. A steam boiler is needed as part of the design of a new this expansion. The boiler can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. A2BP, an American EPC company provided an analysis of the costs that shows 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 8% 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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Question

Pls provide cash flow diagram if needed

PROBLEM #2:
There will be an expansion project in Malampaya gas field. A steam boiler is needed as
part of the design of a new this expansion. The boiler can be fired by natural gas, fuel oil, or coal.
A decision must be made on which fuel to use. A2BP, an American EPC company provided an
analysis of the costs that shows 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 8% interest, a 20-year analysis
period, and no salvage value, which is the most economical installation?

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