Choosing Between Electric Motors for Efficiency and Cost Savings

Which of the motors should be selected when comparing their net present worth (NPW)?

Standard electric motor

High efficiency motor

Both are equally acceptable

None are acceptable

The High Efficiency Motor Should Be Selected

From the calculations, it has been found that the present cost is lower for the high efficiency motor. Thus, the high efficiency motor should be selected.

The net present worth, also known as net present value, is the value of all future cash flows, whether positive or negative, over the entire life of an investment discounted to the present. In this case, the high efficiency motor proves to be the better choice compared to the standard electric motor.

Calculation for the annual power cost:

Annual power cost of the lower efficiency motor = 10 * 0.7457 * 2500 * 0.07 / 0.87 = 1499.97

Annual power cost of the high efficiency motor = 10 * 0.7457 * 2500 * 0.07 / 0.93 = 1403.20

NPW of the lower efficiency motor = -800 - 1499.97 * (P/A,8%,12) + 50 * (P/F,8%,12) = -12084.03

NPW of the high efficiency motor = -1200 - 1403.20 * (P/A,8%,12) + 100 * (P/F,8%,12) = -11734.91

Therefore, the high efficiency motor is chosen based on its lower net present worth.