An electric motor is rated at 10 horsepower (HP) and costs $1,200. Its full-load efficiency is specified to be 85%. A newly designed high-efficiency motor

Question

28 users unlocked this solution today!

An electric motor is rated at 10 horsepower (HP) and costs $1,200. Its full-load efficiency is specified to be 85%. A newly designed high-efficiency motor of the same size has an efficiency of 90%, but it costs $1,600. It is estimated that the motors will operate at a rated 10 HP output for 2,000 hours a year, and the cost of energy will be $0.09 per kilowatt-hour. Each motor is expected to have a 15-year life. At the end of 15 years, the first motor will have a salvage value of $50 and the second motor will have a salvage value of $100. Consider the MARR to be 8%.
(a) Use the NPW criterion to determine which motor should be installed.
(b) In part (a), what if the motors operated 1,000 hours a year instead of 2,000 hours a year? Would the motor you chose in part (a) still be the best choice?