An electric motor is rated at 10 horsepower (HP) and costs $800. Its full-load efficiency is specified
Question:
An electric motor is rated at 10 horsepower (HP) and costs $800. 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 costs $1,200. It is estimated that the motors will operate at a rated 10-HP output for 1,500 hours a year, and the cost of energy will be $0.07 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%. (1 HP = 0.7457 kW.)
(a) Determine which motor should be installed based on the PW criterion.
(b) What if the motors operated 2,500 hours a year instead of 1,500 hours a year? Would the motor selected in (a) still be the choice?
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
Step by Step Answer:
a Required HP to produce 10 HP Motor A X 1 10085 11765 HP Motor B X 2 10090 ...View the full answer
