A process heat recovery study identifies five potential modifications, none of which are mutually exclusive, with the costs and energy savings as follows:
Project Capital Cost (MM$) Fuel Savings (MMBtu/h)
A 1.5 15
B 0.6 9
C 1.8 16
D 2.2 17
E 0.3 8
If fuel costs $6/MMBtu and the plant operates for 350 days/year, which projects have a simple payback period less than 1 year? What is the maximum 5-year net present value (NPV) that can be achieved with a 15% interest rate and a 35% tax rate? Assume all the projects can be built immediately and use straight line depreciation with a 3-year recovery term. What combination of projects is selected to meet the maximum NPV?