Question

In September​ 2015, a 3.45 megawatt​ cooling, heating, and power​ (CHP) system was placed in into operation for Southeast Regional Hospital with 360 beds. The CHP system was part of a new​ 20,000 sq. ft. central utility plant that provided the​ 800,000 sq. ft.​ health-care facility with​ cooling, heating and power. By centralizing all of the utilities in one​ location, the hospital accrued significant energy​ savings, as well as improved maintenance efficiency. The financial facts related to the project are summarized as

Installed​ cost: ​$2.6 million

Annual energy cost​ savings: ​$797,000

Annual​ O&M costs: ​$213,000

Project service​ life:17 years

Salvage​ value: ​$200,000

At an interest rate of 11%, what is the net savings per dollar​ invested?

Answer 1

Installed​ cost: ​2600000

Annual energy cost​ savings: ​797,000

Annual​ O&M costs: ​213,000

Project service​ life:17 years

Salvage​ value: ​200,000

At an interest rate of 11%

Net savings per dollar invested = PV of savings / (First cost + PV of costs - PV of salvage value)

= [797000 * (P/A, 11%,17)] / [(2600000 + 213000 * (P/A, 11%,17) -200000 * (P/F, 11%, 17)]

= [797000 * 7.54879439] / [(2600000 + 213000 * 7.54879439 -200000 * 0.169632616 ]

= 6016389.129 / [ 2600000 + 1607893.205 - 33926.5232]

= 1.4183