3. Consider the investment project given in the below table:
An electric motor is rated at 10 horsepower (HP) and costs$1,200. Its full-load efficiency is specified to be 85%. A newlydesigned high-efficiency motor of the same size has an efficiencyof 90%, but it costs $1,600. It is estimated that the motors willoperate at a rated 10 HP output for 2,000 hours/year, and the costof energy will be $0.09/kilowatt- hour. Each motor is expected tohave a 15-year life. At the end of the 15 years, the first motorwill have a salvage value of $50 and the second motor will have asalvage value of $100. Consider the MARR to be 8%. (1 HP = 0.7457kW)
Use NPW to determine which motor should be installed.
