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Imagine That as an Engineering Intern You Have Been Assigned

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Imagine that as an engineering intern you have been assigned the task of selecting a motor for a pump.After reviewing motor catalogs you narrow your choice to two motors that are rated at 1.5 kW.Additional information collected is shown in an accompanying table.The pump is expected to run 4200 hours every year.After checking with your electric utility company, you determine the average cost of electricity is about 10 cents per kWh.Based on the information given here, which one of the motors will you recommend to be purchased? Assume i = 8%.
Imagine that as an engineering intern you have been assigned the task of selecting a motor for a pump.After reviewing motor catalogs you narrow your choice to two motors that are rated at 1.5 kW.Additional information collected is shown in an accompanying table.The pump is expected to run 4200 hours every year.After checking with your electric utility company, you determine the average cost of electricity is about 10 cents per kWh.Based on the information given here, which one of the motors will you recommend to be purchased? Assume i = 8%.


Definitions:

Working Capital

The measure of a company's liquidity, efficiency, and its short-term financial health, calculated as current assets minus current liabilities.

Externalities

Costs or benefits that affect parties who did not choose to incur that cost or benefit, often related to environmental, public health, or economic activities.

Net Present Value (NPV)

A calculation used to assess the profitability of an investment, measuring the difference between the present value of its cash inflows and outflows.

Internal Rate of Return (IRR)

The rate of growth a project is expected to generate, calculated as the discount rate that makes the net present value (NPV) of all cash flows equal to zero.

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