Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.80 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 73% of the loss and will cost $0.25 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.95 per foot. PCCC Physical Plant Services estimates that there are 285,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 7.0%/year return to justify capital expenditures. The insulation has a life expectancy of 10 years.

What is the present worth of each option?

No insulation: $

1-inch insulation: $

2-inch insulation: $

Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is 20.

Which insulation (if any) should be purchased using a ranking present worth analysis?

No insulation

1-inch insulation

2-inch insulation