Reconsider Problem 30. [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 $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89 percent of the loss and will cost $0.40 per foot.A 2-inch thick insulated covering will eliminate 92 percent of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10 percent/year return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased based on an incremental present worth analysis.

Reconsider Problem 30. [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 $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89 percent of the loss and will cost $0.40 per foot.A 2-inch thick insulated covering will eliminate 92 percent of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10 percent/year return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased based on an incremental present worth analysis.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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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 $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10%/year return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased using a ranking present worth analysis.
The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $3,000 next year. A salesperson from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 80% with the installation of $18,000 worth of Superfiber now. If the cost of heat loss rises by $200 per year (uniform gradient) after the next year and the owner plans to keep the present building for 15 more years, what would you recommend if the interest rate is 10% per year?
In a cold storage plant, it is desired to determine whether to use insulation two inches thick or three inches in insulating the walls of the cold storage warehouse. Heat absorbed through the walls without insulation would cost P96.00 per year per square meter. Two-inch insulation will cost P30.40 per square meter and will cut out 89% of the loss. Three-inch insulation will cut out92% of the loss and will cost P65.00 per square meter. Using life of 15 years for the insulation with no salvage value and a minimum attractive return of 8%, what thickness of insulation should be used?
A large city in the midwest needs to acquire a street-cleaning machine to keep its roads looking nice year round. A used cleaning vehicle will cost $85,000 and have a $20,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $150,000 and have a $40,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), andMARR is 12% per year. Solve, a. Find the breakeven percent reduction in labor hours for the new system. b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which machine should the city purchase?
"The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $4000 next year. A salesperson from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 70% with the installation of $20000 worth of Superfiber now. If the cost of heat loss rises by $30 per year (uniform gradient) after the next year and the owner plans to keep the present building for 14 more years, what is the present worth of the savings? Would you recommend installing the insulation now given that the interest rate of 7.68% year?" A 255986.64 B 316901.03 C 24457.35 D 222355.62 E 207412.21
It is estimated that insulation of steam pipes in a factory will reduce fuel bill by as much as 20%. The cost of insulation is P9,000 and the cost of taxes and insurance is 5% of the initial cost. Without the insulation, the annual fuel bill is P18,000. If the insulation is worthless after 6 years and a minimum of 12% is desired, would it be worthwhile to invest in the insulation?
In this problem, we consider replacing an existing electrical water heater with an array of solar panels. The net installed investment cost of the panels is $1,520 ($1,900 less a 20% tax credit from the government). Based on an energy audit, the existing water heater uses 180 kilowatt hours (kWh) of electricity per month, so at $0.14 per kWh, the cost of operating the water heater is $25.2 per month. Assuming the solar panels can save the entire cost of heating water with electricity, answer the following questions. a. What is the simple payback period for the solar panels? b. What is the IRR of this investment if the solar panels have a life of 12 years?
3. Useful lives are equal to the study period At the Motorola plant in Mesa, Arizona, it is desired to determine whether oneinch-thick insulation or two-inch-thick insulation should be used to reduce heat loss from a long section of steam pipe. The heat loss from this pipe without any insulation would cost $2.00 per linear foot per year. The one-inch insulation will eliminate 88% of the heat loss and will cost $0.60 per foot. Two-inch insulation will eliminate 92% of the heat loss and will cost $1.10 per foot. The steam pipe is 1,000 feet in length and will last for10 years. MARR = 6% per year. Which insulation thickness should be recommended?
A large city in the midwest needs to acquire a street-cleanıng machine to keep its roads looking nice year round A used cleaning vehicle will cost $75,000 and have a $20,000 market (salvage) value at the end of its five-year Iife. A new system with advanced features will cost $150,000 and have a $50,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month Labor costs $40 per hour (including fringe benefits), and MARR is 12% per year compounded monthly a. Find the breakeven percent reduction in labor hours for the new system b. If the new system is expected to be able to reduce labor hours by 20% compared with the used system, which machine should the city purchase? a. The breakeven reduction in lebor hours for the new system is ________% (Round to one decimal place)
North City must choose between two new snow-removal machines. The SuperBlower has a $70,000 first cost, a 20-year life, and an $8000 salvage value. At the end of 9 years, it will need a major overhaul costing $19,000. Annual maintenance and operating costs are $9000. The Sno-Mover will cost $50,000, has an expected life of 10 years, and has no salvage value. The annual maintenance and operating costs are expected to be $12,000. Using a 12% interest rate, which machine should be chosen?
A southwestern city that has 170,000 households is required to install treatment systems for the removal of arsenic from drinking water. The annual cost is projected to be $50 per household per year. Assume that one life will be saved every three years as a result of the arsenic removal system andthat the EPA values a human life at $4.8 million. Use a discount rate of 8% per year and assume the life is saved at the end of each three-year period.Utilize a conventional B/C ratio to determine if the project is economically justified.
A highway department is considering building a temporary bridge to cut travel time during the three years it will take to build a permanent bridge. The temporary bridge can be put up in a few weeks in year 1 at a cost of $750,000. At the end of three years, it would be removed and the steel would be sold for scrap. The real net cost of this would be $81,000. Based on estimated time savings and wage rates, fuel savings, and reductions in risks of accidents, department analysts predict that the benefits in real dollars would be $275,000 during the first year, $295,000 during the second year, and $315,000 during the third year. Departmental regulations require use of a real discount rate of 8 percent. (NB. Round discount factors to the nearest 2 decimal points). Calculate the present value of net benefits assuming that the benefits occur at the end of each of the three years. Calculate the present value of net costs assuming that the costs occur at the end of each of the three…