Answer Happy

Parker County community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.20 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 86% of the loss and will cost $0.35 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.75 per foot. PCCC Physical plant services estimates that there are 250000 feet of steam pipe on campus. The PCCC accounting office requires a 10 percent/year return to justify expenditures. The insulation has a life expectancy of 10 years. Determine which insulation should be purchased using a ranking present worth analysis.