You are specifying an HVAC system You could specify Blower A

You are specifying an HVAC system. You could specify Blower \"A\", which costs $30,000, and uses 500kW-h of electricity per month. Or you could specify Blower \"B\", which is more efficient. It costs $32,000, but only uses 450kW-h per month. Power costs you $.06/kW-h. The system will be operating for 10 years, and you\'re asked to use a 12% discount rate. There\'s no salvage value. Which do you specify? (2 pt) 5.

Solution

Annual electricity cost, Blower A = 500 x 12 x $0.06 = $360

Annual electricity cost, Blower B = 450 x 12 x $0.06 = $324

Present Worth of costs, Blower A ($) = 30,000 + 360 x P/A(12%, 10) = 30,000 + 360 x 5.6502** = 30,000 + 2,034

= 32,034

Present Worth of costs, Blower B ($) = 32,000 + 324 x P/A(12%, 10) = 32,000 + 324 x 5.6502** = 32,000 + 1,831

= 33,831

Since Blower A has lower present worth of costs, this should be selected.

**From P/A Factor table