You are in the market for a heat exchanger. You want to compare two choices from a purely economic point of view. The two choices are Item New Heat Exchanger $15,000

$1600 $ 600 Used Heat Exchanger Purchase price $30,000 Yearly operational cost $1100 Yearly maintenance cost $100.00 Resale value at end of 6 years $16,000 $7000 You plan to replace the HX at end of 6 years. Assume that operating cost and maintenance costs are paid at end of year to simplify the calculations. Assume that money can be borrowed at 9.24 % pa interest rate compounded annually. 1. What is the Net Present Cost of New Heat Exchanger? Enter answer in the Answer Box below 2. What is the difference in Net Present Cost? Which choice minimizes the Net Present Cost? 3. What is the difference in average net annual cost if you do not consider the time value of money? 4. What is the difference in equivalent annual cost (EAC) if you take the time value of money into account. To do this you should convert the one time cash flows such as investment and resale values to an annualized cost. Which choice is better from an economic point of view?