A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at %4 per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of %9. The firm's MARR, which includes an allowance for general price inflation, is %18 per year (im). No market value is expected from the heat pump at the end of the 12 years of service life.

a. What is the PW of owning and operating the heat pump?
The PW is $-------- enter your response here. (Round to the nearest dollar.)
b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump?
The AW is $------- enter your response here. (Round to the nearest dollar.)
(ii) What is the AW in real dollars of owning and operating the heat pump?
The AW is $------ enter your response here. (Round to the nearest dollar.)

Transcribed Image Text:A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of 12 years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at 4% per year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of 9%. The firm's MARR, which includes an allowance for general price inflation, is 18% per year (im). No market value is expected from the heat pump at the end of the 12 years of service life. Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year. ..... a. What is the PW of owning and operating the heat pump? The PW is $ . (Round to the nearest dollar.) b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump? The AW is $ . (Round to the nearest dollar.) (ii) What is the AW in real dollars of owning and operating the heat pump? The AW is $ . (Round to the nearest dollar.)
Transcribed Image Text:More info Discrete Compounding; i= 18% Single Payment Compound Amount Uniform Series Sinking Compound Amount Capital Recovery Factor Present Present Fund Factor Worth Factor Factor Worth Factor Factor To Find F To Find P To Find F To Find P To Find A To Find A Given P Given F Given A Given A Given F Given P F/P P/F FIA PIA A/F A/P 1 1.1800 0.8475 1.0000 0.8475 1.0000 1.1800 2 1.3924 0.7182 2.1800 1.5656 0.4587 0.6387 1.6430 0.6086 3.5724 2.1743 0.2799 0.4599 4 1.9388 0.5158 5.2154 2.6901 0.1917 0.3717 2.2878 0.4371 7.1542 3.1272 0.1398 0.3198 2.6996 0.3704 9.4420 3.4976 0.1059 0.2859 7 3.1855 0.3139 12.1415 3.8115 0.0824 0.2624 3.7589 0.2660 15.3270 4.0776 0.0652 0.2452 4.4355 0.2255 19.0859 4.3030 0.0524 0.2324 10 5.2338 0.1911 23.5213 4.4941 0.0425 0.2225 11 6.1759 0.1619 28.7551 4.6560 0.0348 0.2148 12 7.2876 0.1372 34.9311 4.7932 0.0286 0.2086 13 8.5994 0.1163 42.2187 4.9095 0.0237 0.2037 14 10.1472 0.0985 50.8180 5.0081 0.0197 0.1997 15 11.9737 0.0835 60.9653 5.0916 0.0164 0.1964 16 14.1290 0.0708 72.9390 5.1624 0.0137 0.1937 17 16.6722 0.0600 87.0680 5.2223 0.0115 0.1915 18 19.6733 0.0508 103.7403 5.2732 0.0096 0.1896 19 23.2144 0.0431 123.4135 5.3162 0.0081 0.1881 20 27.3930 0.0365 146.6280 5.3527 0.0068 0.1868

Question

A small heat pump now costs ​$2,500 to purchase and install. It has a projected useful life of  years and will incur annual maintenance costs of ​$75 per year in real​ (year-zero) dollars over the useful life. These costs are projected to increase at ​%4 per​ year, which is the expected general inflation rate. The annual cost of electricity for the heat pump is ​$700 in​ year-zero dollars. Electricity prices are projected to increase at an annual rate of ​%9. The​ firm's MARR, which includes an allowance for general price​ inflation, is ​%18 per year ​(im​). No market value is expected from the heat pump at the end of the 12 years of service life.  a. What is the PW of owning and operating the heat​ pump?     The PW is ​$-------- enter your response here. ​(Round to the nearest ​dollar.)b.​ (i) What is the​ AW, expressed in actual​ dollars, of owning and operating the heat​ pump?         The AW is ​$------- enter your response here. ​(Round to the nearest​ dollar.)   ​ (ii) What is the AW in real dollars of owning and operating the heat​ pump?          The AW is ​$------ enter your response here. ​(Round to the nearest​ dollar.) A small heat pump now costs $2,500 to purchase and install. It has a projected useful life of 12 years and will incur annual maintenance costs of $75 per year in real (year-zero) dollars over the useful life. These costs are projected to increase at 4% per year,which is the expected general inflation rate. The annual cost of electricity for the heat pump is $700 in year-zero dollars. Electricity prices are projected to increase at an annual rate of 9%. The firm's MARR, which includes an allowance for general price inflation,is 18% per year (im). No market value is expected from the heat pump at the end of the 12 years of service life.Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year......a. What is the PW of owning and operating the heat pump?The PW is $ . (Round to the nearest dollar.)b. (i) What is the AW, expressed in actual dollars, of owning and operating the heat pump?The AW is $. (Round to the nearest dollar.)(ii) What is the AW in real dollars of owning and operating the heat pump?The AW is $ . (Round to the nearest dollar.) More infoDiscrete Compounding; i= 18%Single PaymentCompoundAmountUniform SeriesSinkingCompoundAmountCapitalRecoveryFactorPresentPresentFundFactorWorth FactorFactorWorth FactorFactorTo Find FTo Find PTo Find FTo Find PTo Find ATo Find AGiven PGiven FGiven AGiven AGiven FGiven PF/PP/FFIAPIAA/FA/P11.18000.84751.00000.84751.00001.180021.39240.71822.18001.56560.45870.63871.64300.60863.57242.17430.27990.459941.93880.51585.21542.69010.19170.37172.28780.43717.15423.12720.13980.31982.69960.37049.44203.49760.10590.285973.18550.313912.14153.81150.08240.26243.75890.266015.32704.07760.06520.24524.43550.225519.08594.30300.05240.2324105.23380.191123.52134.49410.04250.2225116.17590.161928.75514.65600.03480.2148127.28760.137234.93114.79320.02860.2086138.59940.116342.21874.90950.02370.20371410.14720.098550.81805.00810.01970.19971511.97370.083560.96535.09160.01640.19641614.12900.070872.93905.16240.01370.19371716.67220.060087.06805.22230.01150.19151819.67330.0508103.74035.27320.00960.18961923.21440.0431123.41355.31620.00810.18812027.39300.0365146.62805.35270.00680.1868

Accepted Answer

Initial Cost
2,500

Maintenance Cost
75
Increased at 4% per year

Annual Cost
700
Increased at…