A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $114,000, and it will save an estimated 340,000 kilowatt-hours (kWh) of electric power each year over afive-year period. A kilowatt-hour of electricity costs $0.08. The market value, additional annual operating and maintenance expenses are negligible. What is the benefit-cost ratio of the project if the general inflation rate is 3% per year? The market interest rate = (im) is 22% per year, and the annual savings are expressed in year- zero dollars. Use the benefit-cost method to make a recommendation. The benefit-cost ratio of the system with PW is____--_?

A retrofitted space-heating system is being considered for a small office building. The system can be purchased and installed for $114,000, and it will save an estimated 340,000 kilowatt-hours (kWh) of electric power each year over afive-year period. A kilowatt-hour of electricity costs $0.08. The market value, additional annual operating and maintenance expenses are negligible. What is the benefit-cost ratio of the project if the general inflation rate is 3% per year? The market interest rate = (im) is 22% per year, and the annual savings are expressed in year- zero dollars. Use the benefit-cost method to make a recommendation. The benefit-cost ratio of the system with PW is____--_?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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