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A process heat recovery study identifies five potential modifications, none of which are mutually exclusive, with the costs and energy savings as follows:

Project Capital Cost (MM$) Fuel Savings (MMBtu/h)

A 1.5 15

B 0.6 9

C 1.8 16

D 2.2 17

E 0.3 8

If fuel costs $6/MMBtu and the plant operates for 350 days/year, which projects have a simple payback period less than 1 year? What is the maximum 5-year net present value (NPV) that can be achieved with a 15% interest rate and a 35% tax rate? Assume all the projects can be built immediately and use straight line depreciation with a 3-year recovery term. What combination of projects is selected to meet the maximum NPV?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92604292

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