Natural gas unit was expected to have the energy cost

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Reference no: EM13878417

At NYIT in 1993 a 100ton electric A/C system (electric driven compressor) with a 100 ton natural gas absorption system. Electric then was$. 12/kwh and the natural gas unit was expected to have the energy cost.

Other date is listed below. Make a financial analysis and decide if a replacement is worth it.

Lifespan of electric system=10 years and salvage S=0; Lifespan of the absorption system is 20 years and S=0(even after 10years)

Energy savings = 50% of electric; Maintenance Cost/yr, gas $6000/yr: Initial cost of electric=0 (sunk cost), gas $6000 and the installation is additional $20,000. Gov’t funding is 30% of the initial cost. The may assume any other unknown factors.

On a quantitative basis is the switch justified. Work the problem out either on a present value basis for 10 years or annuitized cost per year for the same time period.

Reference no: EM13878417

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