Question 2 [Total 15 marks] A retrofitted heating system is being considered for an office building. The system can be p

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Question 2 Total 15 Marks A Retrofitted Heating System Is Being Considered For An Office Building The System Can Be P 1 (96.51 KiB) Viewed 39 times

Question 2 [Total 15 marks] A retrofitted heating system is being considered for an office building. The system can be purchased and installed for $ (501,000), and it will save an estimated (101,000) kilowatt-hours (kWh) of electric power each year over a 6-year period. A kilowatt-hour of electricity costs $1.164. The market value (MV) of the system will be $ (8,100) at the end of six years, and the annual operating and maintenance expenses (O&M) for the system are $ (5,100). MARR is 15% per year. (a) Use the conventional benefit-cost (B/C ratio) for Present Worth method to make a recommendation. (i) Compute the conventional B/C ratio. Round your answer to 2 decimal places. (ii) Should this system be purchased? Why? (b) Use the modified benefit-cost (B/C ratio) for Present Worth method to make a recommendation. (i) Compute the modified B/C ratio. Round your answer to 2 decimal places. Should this system be purchased? Why? (c) Assume that the electricity costs will increase at the inflation rate of 3% per year. (i) Compute the conventional B/C ratio. Round your answer to 2 decimal places. (ii) Should this system be purchased? Why?