An elevator company has redesigned their product to be 50% more energy efficient than hydraulic designs. Two designs are being considered for implementation in a new building. (a) Given an interest rate of 20% which bid should be accepted?
Alternatives
Installed cost
Annual cost
Salvage value
Life, in years
​ A
$45,000
2700
3000
10
​ B
$54,000
2850
4500
15
(b) Research and list a few attributes that the company might be using in the elevators' major systems drive, cab, hoist, and control mechanisms that make them more energy efficient.

An Elevator Company

a) Given an interest rate of 20%, bid A should be accepted.

b) Attributes that make the Elevators More Energy Efficient:

1. software- and microprocessor-based controls without using electromechanical relays

2. in-cab sensors and software to automatically turn off lights, ventilation, and other facilities when not in use.

3. destination dispatch control software to batch elevator stops.

4. Using dispatch controls that rely on personalized calls instead of in-cab controls.

Explanation:

a) Data and Calculations:

Interest rate = 20%

Alternatives             A                     B

Installed cost        $45,000      $54,000

Annual cost               2,700          2,850

Salvage value           3,000          4,500

Life, in years           10 years       15 years

Present value

 annuity factor         4.192          4.675

Discount factor        0.162          0.065            

Present values:

Installed cost        $45,000      $54,000

Annual cost               11,318          13,324

Salvage value             (486)            (293)

Net present cost $55,832       $67,031

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