The costs of two small heat pump units System A and System B are $1000 and...

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The costs of two small heat pump units System A and System B are $1000 and $1200. The corresponding annual operating costs are $110 and $100 respectively. The interest rate is 8% and the amortization is selected as 20 years. (a) Perform a simple economic analysis and compare the two systems based on present worth basis (hint: initial cost + inflated operating cost) (b) Recommend the more viable option based on the analysis above. State two other considerations other than the outcome of the life cycle cost analysis, which should be accounted for when making the final decision. (c) Given that an inflation rate of 5% is to be considered, determine the effective interest rate or real rate and comment on the impact on the operating costs and previous recommendation. The costs of two small heat pump units System A and System B are $1000 and $1200. The corresponding annual operating costs are $110 and $100 respectively. The interest rate is 8% and the amortization is selected as 20 years. (a) Perform a simple economic analysis and compare the two systems based on present worth basis (hint: initial cost + inflated operating cost) (b) Recommend the more viable option based on the analysis above. State two other considerations other than the outcome of the life cycle cost analysis, which should be accounted for when making the final decision. (c) Given that an inflation rate of 5% is to be considered, determine the effective interest rate or real rate and comment on the impact on the operating costs and previous recommendation.

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Economic Analysis of Heat Pump Systems a Present Worth Analysis To compare the two systems we need to calculate the present worth of all costs System ... View the full answer