You Are Deciding Between Three Types of Water Heaters

Essay

You are deciding between three types of water heaters. The associated costs are shown below. At the end of year 5, the electricity and oil water heaters need to be replaced with the same model at the purchased prices. Which alternative should be selected on the basis of their future worth at an interest rate of 12% per year?
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$$\begin{array} { l | c | c | c } \text { ernative } & \text { Electricity } & \text { Gas } & \text { Oil } \\\hline \begin{array} { c } \text { ce of water } \\\text { ter }\end{array} & \$ 32,000 & \$ 27,000 & \$ 29,000 \\\hline & 2.0 & 0.57 & 0.75 \\\hline \text { l cost } & \$ 0.075 / \mathrm { kWh } & \$ 0.000009 / \mathrm { Btu } & \$ 0.000009 / \mathrm { Btu } \\\hline \begin{array} { l } \text { nual } \\\text { intenance } \\\text { ts }\end{array} & \$ 1000 & \$ 200 & \$ 500 \\\hline \text { e, years } & 5 & 10& 5\\\hline\end{array}$$ $$\begin{array} { l | c | c | c } \text { ernative } & \text { Electricity } & \text { Gas } & \text { Oil } \\\hline \begin{array} { c } \text { ce of water } \\\text { ter }\end{array} & \$ 32,000 & \$ 27,000 & \$ 29,000 \\\hline & 2.0 & 0.57 & 0.75 \\\hline \text { l cost } & \$ 0.075 / \mathrm { kWh } & \$ 0.000009 / \mathrm { Btu } & \$ 0.000009 / \mathrm { Btu } \\\hline \begin{array} { l } \text { nual } \\\text { intenance } \\\text { ts }\end{array} & \$ 1000 & \$ 200 & \$ 500 \\\hline \text { e, years } & 5 & 10& 5\\\hline\end{array}$$ Hint: The estimated annual cost of operation for gas and oil heaters equals
365 x 41045/EF x Fuel Cost per Btu and the estimated annual cost of operation for electric water heaters equals 365 x 12.03/EF x Electricity Cost per kWh.