Question

You have a process with the following parameters. What is the EUAW (EUAB-EUAC) for the process,...

You have a process with the following parameters. What is the EUAW (EUAB-EUAC) for the process, given a 15% interest rate?

First cost: $1.7M
O&M costs for Year 1: $29,000
Cost gradient: +$750/year  (Year 2 is 29,750; year 3 is 30,500, and so forth)
Annual benefit: $303,000
Salvage value: $210,000
Useful life, in years: 20
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Homework Answers

Answer #1

EUAB

Annual benefit: $303,000

Annual Salvage value = $210,000 (A/F, 15%, 20)

Annual Salvage value = $210,000 (0.0098) = 2058

EUAB = 303,000 + 2,058 = 305,058

EUAC

Annual First cost: $1,700,000 (A/P, 15%, 20)

Annual First cost: $1,700,000 (0.1598) = 271,660

Converting gradient series into uniform series

A = A1 + G (A/G, 15%, 20)

A = 29,000 + 750 (A/G, 15%, 20)

A = 29,000 + 750 (5.3651) = 33,024

EUAC = 271,660 + 33,024 = 304,684

EUAC = EUAB-EUAC

EUAC = 305, 058 – 304,684 = 374

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