Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 1

September 2015, a 3.4.5 megawatt cooling, heating, and power (CHP) system was placed in into operation for Southeast Regional Hospital with 360 beds. The CHP system was part of a new 20,000 sq. ft. central utility plant that provided the 800,000 sq. ft. health-care facility with cooling, heating and power. By centralizing all of the utilities in one location, the hospital accrued significant energy savings, as well as improved maintenance efficiency. The financial facts related to the project are summarized as
• Installed cost: $2.5 million
• Annual energy cost savings: $786,000
• Annual O M costs: $233,000
• Project service life: 15 years
• Salvage value: $200,000
At an interest rate of 8%, what is the net savings per dollar invested