A company wants to renew its old natural gas fired boiler. According to the received price...
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A company wants to renew its old natural gas fired boiler. According to the received price offer, the new boiler is 400,000 TL in cash. The natural gas consumption of this boiler is 15 m³/hour and the price of natural gas is 1.1 TL/m3. The annual real price escalation of natural gas is determined as 1%. The annual cost of the boiler operation and maintenance costs is 25,000 TL and the annual escalation value is 17%. By purchasing a new boiler, some of the costs of the old boiler will be saved. The old boiler has costs of 250,000 TL increasing by 15% annually. The new boiler will run for 6,000 hours a year. The annual discount rate is 24% and the annual inflation rate is 17%. Determine whether it is economically feasible to purchase the new boiler by using the annual worth method, taking into account the 10-year costs and savings. Use real rates for relevant parameters in calculations. (40 P) A company wants to renew its old natural gas fired boiler. According to the received price offer, the new boiler is 400,000 TL in cash. The natural gas consumption of this boiler is 15 m³/hour and the price of natural gas is 1.1 TL/m3. The annual real price escalation of natural gas is determined as 1%. The annual cost of the boiler operation and maintenance costs is 25,000 TL and the annual escalation value is 17%. By purchasing a new boiler, some of the costs of the old boiler will be saved. The old boiler has costs of 250,000 TL increasing by 15% annually. The new boiler will run for 6,000 hours a year. The annual discount rate is 24% and the annual inflation rate is 17%. Determine whether it is economically feasible to purchase the new boiler by using the annual worth method, taking into account the 10-year costs and savings. Use real rates for relevant parameters in calculations. (40 P)
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To determine the economic feasibility of purchasing the new boiler we will calculate the annual worth of costs and savings over a 10year period using the annual worth method Lets break down the calcul... View the full answer
Related Book For
Managerial Decision Modeling With Spreadsheets
ISBN: 9780136115830
3rd Edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
Posted Date:
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