### What is the rate of return or return on investment

##### Reference no: EM13999952

Currently a heating unit for a small building is very old and inefficient. The owner is contemplating on replacing it with a variable air volume system that costs \$100,000 and will save 450,000 kWh each year. The cost of electricity is \$0.06 per kWh. The life expectancy of the new unit is 10 years and will have a salvage value of \$500. If the interest rate is 10% will the new system be cost effective. Base your decision on the (a) present worth analysis and (b) equivalent uniform annual cost analysis. What is the rate of return (ROR) or Return on investment (ROI). Based on your finding propose whether the purchase is worth it or not.

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