1. Problem Definition.
Same case like on W9 blog posting, author plan to install CNG compressor with electric motor prime mover for the gas station and author received a complete offer with the specifications of the three manufacturers of CNG compressor. In this blog, the author wants to analyze cost-only alternatives of the three brands of CNG compressor using equivalent worth. Which CNG compressor should be preferred base on equivalent worth?
2. Identify the Feasible Alternative.
The following table contains data of three brand of CNG compressor that will be selected.
Table 1. The CNG Compressor Data
This CNG compressor will be used for 20 years and the company has a MARR of 15%
3. Development of the Outcome for Alternative.
Using table 1 data, we will calculate the PW (Present Worth), AW (Annual Worth), and FW (Future Worth). The result cans we seen on table below.
Table 2. The Result of Equivalent Worth Values
4. Selection of Criteria.
The pump that will minimize the equivalent worth of total costs over the ten-year analysis period will be used as selection of criteria.
5. Analysis and Comparison of the Alternative.
The comparison of three brand CNG compressor using the PW, AW, and FW methods to minimize total cost as seen as table 3 below.
Table 3. The Comparison of the CNG Compressor
From the table 3, alternative Brand A minimizes all three equivalent-worth values of total costs and is the preferred alternative. The preference ranking (Brand A > Brand C > Brand B) resulting from the analysis is the same for all three methods.
6. Selection of the Preferred Alternative.
Base from above calculation, brand A minimizes all three equivalent-worth values of total costs and is the preferred alternative for the gas station.
7. Performance Monitoring and the Post Evaluation of Result.
Monitoring should be conducted during execution of the project to ensure that all requirements are met.
- Sullivan, G. W. (2014). Engineering Economy 16th Chapter 6 – Comparison and Selection among Alternatives, pp. 264-331
- Fakhri, Muhammad. (2017). W12_MFO_Analyzing Cost Only Alternative|Emerald AACE 2018. Retrieved from http://emeraldaace2017.com/2017/11/17/w12_mfo_analyzing-cost-only-alternative-using-equivalent-worth-for-selecting-fire-water-pump/
- What is the formula for calculating net present value (NPV) in excel. Retrieved from https://www.investopedia.com/ask/answers/021115/what-formula-calculating-net-present-value-npv-excel.asp
- How to calculate net present value (NPV) in excel. Retrieved from https://www.youtube.com/watch?v=hG68UMupJzs