A client is considering replacing his heating system. System A is the standard scheme whereas system B relies on additional insulation being provided System A System B Initial costs Boiler Pipework and units Insulation 160,000 48,000 12,000 170,000 42,000 32,000 Recurring costs Repairs (per annum) 3,000 2,800 Replacement 40,000 (every 20 years) 32,000 (every 20 years) Overhaul 15,000 (every 5 years) 15,000 (every 5 years) Fuel (per annum) 15,000 11,000 Evaluate the two systems and make a recommendation. The assuming the remaining expected life of each building is 25 years and the discount rate to be used is 6%. (Extracts from NPV tables has been attached.) Table 11 Present Value Factors: Present Value of 1 (1+r)** 28% 12% 0.893 22% 0.820 25% 0.800 0.640 26% 0.794 0.630 30% 0.769 0.592 0.797 0.712 0.636 0.672 0.551 0.451 0.781 0.561 0.640 0.610 0.512 0.410 0.500 0.397 0.455 0.350 0.315 0.269 0.621 0.617 0.567 0.507 0.452 0.404 0.210 0.250 0.198 0.137 0.619 0.618 0.618 0.207 0.159 0.123 0.125 0.094 0.073 0.099 Discounted Rates (0% Periods 1 2% 4% 6% 10% 1 0.990 0.980 0.962 0.943 0.909 2 0.980 0.961 0.925 0.890 0.826 3 0.971 0.942 0.889 0.840 0.751 4 0.961 0.924 0.855 0.792 0.683 5 0.951 0.906 0.822 0.747 0.621 6 0.942 0.888 0.790 0.705 0.564 7 0.933 0.871 0.760 0.665 0.513 8 0.923 0.853 0.731 0.627 0.467 9 0.914 0.837 0.703 0.592 0.424 10 0.905 0.820 0.676 0.558 0.386 11 0.896 0.804 0.650 0.527 0.350 12 0.887 0.788 0.625 0.497 0.319 13 0.879 0.773 0.601 0.469 0.290 14 0.870 0.758 0.577 0.442 0.263 15 0.861 0.743 0.555 0.417 0.239 16 0.853 0.728 0.534 0.394 0.218 17 0.844 0.714 0.513 0.371 0.198 18 0.836 0.700 0.494 0.350 19 0.828 0.686 0.475 0.331 0.164 20 0.820 0.673 0.456 0.312 0.149 21 0.811 0.660 0.439 0.294 0.135 22 0.803 0.647 0.422 0.278 0.123 23 0.795 0.634 0.406 0.262 0.112 24 0.788 0.622 0.390 0.247 0.102 25 0.780 0.610 0.375 0.233 0.092 0.056 0.361 0.322 0.287 0.257 0.229 0.205 15% 16% 18% 20% 0.870 0.862 0.847 0.833 0.756 0.743 0.718 0.694 0.658 0.641 0.609 0.579 0.572 0.552 0.516 0.482 0.497 0.476 0.437 0.402 0.432 0.410 0.370 0.335 0.376 0.354 0.314 0.279 0.327 0.305 0.266 0.233 0.284 0.263 0.225 0.194 0.247 0.227 0.191 0.162 0.215 0.195 0.162 0.135 0.187 0.168 0.137 0.112 0.163 0.145 0.116 0.093 0.141 0.125 0.099 0.078 0.123 0.108 0.084 0.063 0.107 0.093 0.071 0.054 0.093 0.080 0.060 0.045 0.081 0.069 0.051 0.038 0.070 0.060 0.043 0.031 0.061 0.051 0.037 0.026 0.053 0.044 0.031 0.022 0.046 0.038 0.026 0.018 0.033 0.022 0.015 0.035 0.028 0.019 0.013 0.030 0.024 0.016 0.010 0.370 0.328 0.303 0.262 0.249 0.204 0.168 0.167 0.134 0.137 0.107 0.112 0.086 0.092 0.069 0.075 0.055 0.062 0.044 0.051 0.035 0.042 0.028 0.034 0.023 0.079 0.062 0.050 0.618 0.618 0.618 0.618 0.043 0.033 0.039 0.618 0.025 0.020 0.618 0.183 0.163 0.146 0.130 0.031 0.025 0.020 0.016 0.618 0.015 0.618 0.012 0.618 0.009 0.618 0.007 0.618 0.005 0.028 0.018 0.023 0.014 0.019 0.012 0.01$ 0.009 0.116 0.104 0.093 0.012 0.010 0.008 0.618 0.004 0.083 0.618 0.074 0.040 0.013 0.007 0.010 0.006 0.008 0.005 0.007 0.004 0.006 0.005 0.004 0.618 0.618 0.003 0.002 0.002 0.001 0.066 0.059 0.003 0.618 Table III Present Value Annuity Factors: Present Value of 1 received annually for n years (1-(1+r)* +4") 1% Gola Discounted Rates (C)% Years 2% 4% 6% 10% 12% 15% 16% 18% 1 0.990 0.980 0.962 0.943 0.9090.893 0.870 0.8620.847 2 1.970 1.942 1.886 1.833 1.736 1.690 1.626 1.605 1.566 3 2.941 2.884 2.775 2.673 2.487 2.402 2.283 2.246 | 2.174 4 3.902 3.808 3.630 3.465 3.170 3.037 2.855 2.798 2.690 5 4.853 4.713 4.452 4.212 3.791 3.605 3.352 3.274 3.127 6 5.795 5.601 5.242 4.917 4.355 4.111 3.784 3.685 3.498 7 6.728 6.472 6.002 5.582 4.8684.564 4.160 4.039 3.812 8 7.652 7.325 6.733 6.210 5.335 4.968 4.487 4.344 4.078 9 8.566 8.162 7.435 6.802 5.759 5.328 4.772 4.607 4.303 10 9.471 8.983 8.111 7.360 6.145 5.6505.019 4.833 4.494 11 10.368 9.787 8.760 7.887 6.495 5.938 5.234 5.029 4.656 12 11.255 10.575 9.385 8.3846.814 6.1945.421 5.1974.793 13 12.134 11.348 9.986 8.853 7.1036.424 5.583 5.3424.910 14 13.004 12.106 10.563 9.2957.3676.628 5.724 5.468 5.008 15 13.865 12.849 11.118 9.712 7.606 6.811 5.847 5.575 5.092 16 14.718 13.578 11.652 10.1067.824 6.974 5.954 5.668 5.162 17 15.562 14.292 12.166 10.477 8.022 7.1206.047 5.749 5.222 18 16.398 14.992 12.659 10.828 8.2017.250 6.128 5.818 5.273 19 17.226 15.678 13.134 | 11.158 8.365 7.366 6.198 5.8775.316 20 18.046 16.351 13.590 11.470 8.5147.469 6.259 5.9295.353 21 18.857 17.011 14.029 11.7648.6497.562 6.312 5.9735.384 22 19.660 17.658 14.451 12.042 8.7727.645 6.359 6.011 5.410 23 20.456 18.292 14.857 12.303 8.8837.718 6.399 6.044 5.432 24 21.243 18.914 15.247 12.550 8.985 7.784 6.434 6.073 5.451 25 22.023 19.523 15.622 12.783 9.077 7.843 6.464 6.097 5.467 SI 20% 22% 25% 26% 28% 30% 0.8330.820 0.800 0.794 0.781 0.769 1.528 1.492 1.440 1.424 1.392 1.361 2.106 2.042 1.952 1.923 1.868 1.816 2.589 2.494 2.362 2.320 2.241 2.166 2.991 2.864 2.689 2.635 2.532 2.436 3.326 3.167 2.951 2.885 2.759 2.643 3.605 3.416 3.161 3.083 2.937 2.802 3.837 3.619 3.329 3.241 3.076 2.925 4.031 3.786 3.463 3.366 3.1843.019 4.1923.923 3.571 3.465 3.269 3.092 4.327 4.035 3.656 3.543 3.335 3.147 4.4394.127 | 3.725 3.606 3.387 3.190 4.533 4.203 3.780 3.656 3.427 3.223 4.611 4.265 3.824 3.695 3.459 3.249 4.675 4.315 3.859 3.726 3.483 3.268 4.7304.357 3.887 3.751 3.503 3.283 4.775 4.391 3.910 3.771 3.518 3.295 4.812 4.419 3.928 3.786 3.529 3.304 4.843 4.4423.942 3.799 3.539 3.311 4.870 4.4603.954 3.808 3.546 3.316 4.891 4.476 3.963 3.816 3.551 3.320 4.909 4.488 3.970 3.822 3.556 3.323 4.925 4.499 3.976 3.827 3.559 3.325 4.937 4.507 3.981 3.831 3.562 3.327 4.948 4.514 3.834 3.564 3.329 3.985