Check my 5 A remotely located air sampling station can be powered by solar cells
ID: 1138770 • Letter: C
Question
Check my 5 A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $7,000 to install and will have a useful life of 4 years with no salvage value. Annual costs for inspection, cleaning, etc. are expected to be $1,250. A new power line will cost $10,500 to install, with power costs expected to be $950 per year. Since the air sampling project will end in 4 years, the salvage value of the line is considered to be zero. At an interest rate of 9% per year, which alternative should be selected on the basis of a future worth analysis? 10 points The future worth of solar cells is $and that of electric line is $ eBook Hint Print References (Click to select) should be selected on the basis of a future worth analysis. Solar cells Electric lineExplanation / Answer
Solution :-
Future Worth of Solar cells
Initial Cost = 7000
Annual Maintenance cost = 1250
Life = 4 years
.interest rate = 9%
Formula uses
F = P(F/P , i . n) in case of initial cost
F = A(F/P , i . n) in case of annual cost
Now future Worth = P(F/P , i . n) + A(F/P , i . n) - Salvage Value
= 7000*1.41158 + 1250*3.8947 - 0
= 9881.06 + 4868.375 = 14749.435
Future Worth of Power Line
Initial Cost = 10500
Annual Maintenance cost = 950
Life = 4 years
.interest rate = 9%
Formula uses
F = P(F/P , i . n) in case of initial cost
F = A(F/P , i . n) in case of annual cost
Now future Worth = P(F/P , i . n) + A(F/P , i . n) - Salvage Value
= 10500*1.41158 + 950*3.8947 - 0
= 14821.59 + 3699.965 = 18521.555
Here the future worth of the Electric line is high
So Solar cells should be selected