Consider manufacturing equipment that has an installed cost of $120,000. The equipment is expected to generate $45,000 of the annual energy savings during its first year of installation. The value of these annual savings is expected to increase by 5% per year (over previous year) because of increased fuel costs. Assume that the equipment has a service life of 10 years (or 5,000 operating hours per year) with $20,000 worth of salvage value. Determine the equivalent dollar savings per each operating hour at i = 10% per year.(a) $6.99 per hour(b) $7.24 per hour( c) $4.45 per hour(d) $4.29 per hour
Consider manufacturing equipment that has an installed cost of $120,000. The equipment is expected to generate $45,000 of the annual energy savings during its first year of installation. The value of these annual savings is expected to increase by 5% per year (over previous year) because of increased fuel costs. Assume that the equipment has a service life of 10 years (or 5,000 operating hours per year) with $20,000 worth of salvage value. Determine the equivalent dollar savings per each operating hour at i = 10% per year.(a) $6.99 per hour(b) $7.24 per hour( c) $4.45 per hour(d) $4.29 per hour
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider manufacturing equipment that has an installed cost of $120,000. The equipment is expected to generate $45,000 of the annual energy savings during its first year of installation. The value of these annual savings is expected to increase by 5% per year (over previous year) because of increased fuel costs. Assume that the equipment has a service life of 10 years (or 5,000 operating hours per year) with $20,000 worth of salvage value. Determine the equivalent dollar savings per each operating hour at i = 10% per year.
(a) $6.99 per hour
(b) $7.24 per hour
( c) $4.45 per hour
(d) $4.29 per hour
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