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Question 6.T-Y-S.H: Two insulation thickness alternatives have been proposed for...

Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather conditions. One alternative must be selected. Estimated savings in heat loss and installation cost are given below.

Thickness Installed Cost Annual Savings Life
2 cm $20,000 $5,000 4 years
5 cm $40,000 $7,500 6 years

Which thickness would you recommend for a MARR =15 \% per year and negligible market (salvage) values? The study period is 12 years. (6.5)

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\operatorname{AW}_{2 \mathrm{~cm}}(15 \%)=-\$ 20,000(A / P, 15 \%, 4)+\$ 5,000=-\$ 2,006 per year

\mathrm{AW}_{5 \mathrm{~cm}}(15 \%)=-\$ 40,000(A / P, 15 \%, 6)+\$ 7,500=-\$ 3,068 per year

Therefore, the 2 \mathrm{~cm} thickness should be recommended.

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