Parker County Community College (PCCC) is trying to determine whether to utilize no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.10 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 76 percent of the loss and will cost $0.25 per foot. A 2-inch thick insulated covering will eliminate 92 percent of the loss and will cost $0.90 per foot. PCCC Physical Plant Services estimates that there are 230,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 9.0 percent/year return to justify capital expenditures. The insulation has a life expectancy of ten years.
a) Cost of No insulation
b) Cost of 1-inch insulation
c) Cost of 2-inch insulation