A remotely located air sampling station can be powered by solar cells or by running an electric line to the site and using conventional power. Solar cells will cost $12,600 to install and will have a useful life of 4 years with no salvage value. Annual costs for inspection, cleaning, etc. are expected to be $1400. A new power line will cost $11,000 to install, with power costs expected to be $800 per year. Since the air sampling project will end in 4 years, the salvage value of the line is considered to be zero. At an interest rate of 10% per year, which alternative should be selected on the basis of a future worth analysis?
What will be an ideal response?
FWsolar = -12,600(F/P,10%,4) – 1400(F/A,10%,4)
= -12,600(1.4641) – 1400(4.6410)
= $-24,945
FWline = -11,000(F/P,10%,4) – 800(F/A,10%,4)
= -11,000(1.4641) – 800(4.6410)
= $-19,818
Install power line
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