ENGR 340|| Chapter 08|| Example 1
Standby power for pumps at water distribution booster stations can be provided by either gasoline or diesel-powered engines. The estimates for the gasoline engines are as follows
Gasoline
First cost, \$ -150,000
M\&O, \$ per year -41,000
Salvage value, \$ 23,000
Life, years 15
If the incremental PW-based ROR equation associated with (Diesel - Gasoline) is
$0 = -40,000 + 11,000(P/A, \Delta i^*, 15) + 16,000(P/F, \Delta i^*, 15)$,
a. What is the first cost of the diesel engine?
b. Determine the highest MARR value for which Diesel is preferred over Gasoline. Interest rate and borrowing rate is given 14% and 12% respectively.