Analysis period and no salvage value

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A steam boiler is needed as part of the design of a new plant. The boiler can be fired by natural gas, fuel oil, or coal. A decision must be made on which fuel to use. An analysis of the costs shows that the installed cost, with all controls, would be least for natural gas at $30,000; for fuel oil it would be $55,000; and for coal it would be $180,000. If natural gas is used rather than fuel oil, the annual fuel cost will increase by $7500. If coal is used rather than fuel oil, the annual fuel cost will be $15,000 per year less. Assuming 8% interest, a 20-year analysis period and no salvage value, use a present worth analysis to determine the most economical installation.

Reference no: EM13875239

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