DO NOT USE EXCEL AND SHOW FULL WORKING STEPS

Buffalo Wire Works is in the process of designing a new production facility and are currently considering which new motor to use for their testing equipment. Both motors have the same specifications (25 HP, 230 V, 60 Hz, 1800 rpm), provide the same power output (0.746 kW/HP or 18.650 kWh) and differ only in their efficiency ratings and cost. The first motor (Motor A) has an efficiency rating of 85% while the second motor option (Motor B) has a rating of 90%. Further, Motor A costs only $15,000 per unit while Motor B costs $17,500. Both have an expected lifecycle of 20 years. At the end of their useful lives the motors will have salvage values of $1500 (Motor A) and $1000 (Motor B).

The testing facility is expected to operate in support of their new extended shift which operates 12 hours per day, 5 days a week, year round. Buffalo Wire Works have negotiated a price of $0.05 per kWh with the local energy provider and plans to operate the testing station, and thus the motor, at 70% load.

(a) If Buffalo Wire Works has an MARR of 12%, what are the savings per kWh they can expect if they choose Motor B rather than Motor A?

(b) What number of operating hours would make the two motors equally economical?