Individual industries will use energy as efficiently as it is economical to do so, and there are several incentives to improve the efficiency of energy consumption. To illustrate,
Individual industries will use energy as efficiently as it is economical to do so, and there are several incentives to improve the efficiency of energy consumption. To illustrate, consider the selection of a new water pump. The pump is to operate 800 hours per year. Pump A costs $2,200, has an overall efficiency of 81%, and it delivers 10.9 hp. The other available alternative, pump B, costs $800, has an overall efficiency of 43.16%, and delivers 12.4 hp. Both pumps have a useful life of five years and will be sold at that time. (Remember 1 hp=0.746 kW.) Pump A will use SL depreciation over five years with an estimated SV of zero. Pump B will use the MACRS depreciation method with a class life of three years. After five years, pump A has an actual market value of $400, and pump B has an actual market value of $210. Using the IRR method on the after-tax cash flows and a before-tax MARR of 18%, is the incremental investment in pump A economically justifiable? The effective income tax rate is 23%. The cost of electricity is $0.04/kWh, and the pumps are subject to a study period of five years.
The IRR of the incremental investment is ___ %
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
