At NYIT in 1993 a 100ton electric A/C system (electric driven compressor) with a 100 ton natural gas absorption system. Electric then was$. 12/kwh and the natural gas unit was expected to have the energy cost.
Other date is listed below. Make a financial analysis and decide if a replacement is worth it.
Lifespan of electric system=10 years and salvage S=0; Lifespan of the absorption system is 20 years and S=0(even after 10years)
Energy savings = 50% of electric; Maintenance Cost/yr, gas $6000/yr: Initial cost of electric=0 (sunk cost), gas $6000 and the installation is additional $20,000. Gov’t funding is 30% of the initial cost. The may assume any other unknown factors.
On a quantitative basis is the switch justified. Work the problem out either on a present value basis for 10 years or annuitized cost per year for the same time period.