Question: A company is considering installing a solar heating system in its manufacturing plant for space and hot water hearing. There are three possible alternatives as

A company is considering installing a solar heating system in its manufacturing plant for space and hot water hearing. There are three possible alternatives as given in the Table below:

A

B

C

Solar Collector Area

2,500 ft2

3,500ft2

4,500 ft2

Storage tank

1,500 gal

1,500 gal

3,000 gal

Installed Cost

$20,000

$25,000

$50,000

Maintenance Cost

$2,500

$2,000

$1,500

Annual savings

35%

60%

85%

Useful life

10 years

10 years

10 years

Salvage value

0

0

$5,000

Note that the possible energy savings is a function of the size of the solar system installed. It has been determined that the annual heating cost for the plant is worth about $10,000. Use the Present Worth method with i=0 to determine the best alternative.

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