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# Study perioduseful life repeat study periodthe least

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Study period>useful life Repeat Study period=the least common multiple of the useful lives Reinvest The cash flows can be reinvested at the MARR. Concepts Review

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Study period<useful life Imputed market value °± ² : the imputed market value at the end of the study period Concepts Review [ ( / , %, ) ( / , %, )]( / , %, ) ( / , %, ) T MV I A P i U S A F i U P A i U T S P F i U T
Example 1 A steam generator is needed in the design of a new power plant. This generator can be fired by three different fuels, A, B or C, with the following cash flows. If the study period is 20 years and MARR is 8% per year, which type of fuel is most economical? Tutorial 8 of SEEM 2440 A/B A B C Installed investment cost \$30,000 \$55,000 \$180,000 Annual fuel expense X+\$7,500 X X-\$1,500 Salvage value None None None

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Solution 1 Let’s use the AW method. Because X is equal for all fuel types, select the alternative with the least negative AW: B as the most economical. Tutorial 8 of SEEM 2440 A/B (8%) \$30,000( / ,8%,20) \$7,500 10,557 (8%) \$55,000( / 5,604.5 (8%) \$180,000( / \$1,500 16,842 A B C AW A P X X AW A P X X AW A P X X            