Description

An area can be irrigated by pumping water from a nearby river. Two competing installations are being considered.

The MARR is 11% per year and electric power for the pumps costs $0.05 per kWh. Recall that 1 horsepower (hp) equals 0.746 kilowatts.

a) At what level of operation (hours per year) would you be indifferent between the two pumping systems? If the pumping system is expected to operate 2,500 hours per year, which system should be recommended? Explain your decision.

b) Perform a sensitivity analysis on the efficiency of Pump A. Over what range of pumping efficiency is Pump A preferred to Pump B? Assume 2,500 hours of operation per year. Explain your decision.

c) If sensitivity in terms of cost of installation for Pump B is 7% and sensitivity in terms of efficiency for the same Pump is 10%, which factor has the highest sensitivity in this case. Explain in your words why.