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Question: A simple, direct space heating system is currently being used in a professional medical office complex. An upgraded "variable air-volume system" retrofit can be purchased and installed for $200,000 (investment cost). Its power savings in the future will be 500,000 kilo-Watt hours per year over its estimated life of 8 years. The cost of electricity is $0.10 per kilo-Watt hour. If the firm's cost of capital is 12% per year and the residual value of the system in 8 years is $20,000, should the new system be purchased? Use the present worth method.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92314593

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