Two Renewal Energy Alternatives Are Available for Providing Energy at a Remote

question 5

Essay

Two renewal energy alternatives are available for providing energy at a remote federal research facility. The cash flow estimates associated with each alternative are given below. Use the conventional B- C ratio method, with AW as the equivalent- worth measure, to determine which alternative should be selected at an interest rate of 14% per year over a 25- year study period. One alternative must be selected. $$\begin{array} { | l | l | l | } \hline & \text { Alternative I } & \text { Alternative II } \\\hline \text { Initial cost, } \$ & \$ 1,000,000 & \$ 990,000 \\\hline \text { Annual maintenance, } \$ / y r & \$ 380,000 & \$ 359,500 \\\hline \text { Annual benefits, } \$ / \mathrm { yr } & \$ 500,000 & \$ 459,500 \\\hline \text { Salvage value, } \$ & \$ 17,000 & \$ 15,800 \\\hline\end{array}$$

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