In order to reduce cooling electricity consumption in an industrial plant, it is proposed to install an
Question:
In order to reduce cooling electricity consumption in an industrial plant, it is proposed to install an absorption refrigeration system running on solar energy. The absorption system costs $300,000, and the operating and maintenance expenses are $8000/yr. It is estimated that this absorption system will save $27,500/yr in electricity costs. The lifetime of the system is expected to be 20 yr, and the average annual inflation-adjusted interest rate will be 4 percent. The system will have no salvage value after 20 yr of its lifetime. Would you support this project from an economic point of view? How would you evaluate this project if the inflation-adjusted interest rate were 2 percent?
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I