An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify th

Question

An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify this problem (doing nothing is not an option).

	New Baghouse	New ESP
Capital investment	$1,140,000	$992,500
Annual operating expenses	115,500	73,200

The life of both alternatives is 10 years, and the MARR is [latex]15 \%[/latex] per year. Use the IRR method (incrementally) to make a recommendation regarding which alternative to select. Can you list some nonmonetary factors that would favor the new baghouse? (6.4)

Accepted Answer

Examine [latex]\Delta[/latex] (New Baghouse - New ESP):

Incremental investment [latex]=\$ 147,500[/latex]

Incremental annual expenses [latex]=\$ 42,000[/latex] per year for 10 years

Therefore, by inspection, the extra investment required by the new baghouse is producing extra annual expenses, so the new ESP should be recommended.

Double check: [latex]\quad \operatorname{PW}(15 \%)[/latex] for the new baghouse [latex]=-\$ 1,719,671[/latex]

[latex]\operatorname{PW}(15 \%)[/latex] for the new ESP [latex]=-\$ 1,359,876[/latex]

The economic advantage of the ESP may not be sufficient enough to overcome its inability to meet certain design specifications under varying operating conditions.

Question 6.T-Y-S.F: An industrial coal-fired boiler for process steam is equippe...

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