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. The annual cost of operation for gas and oil heaters is estimated by 365 x 41045/EF x Fuel Cost per Btu, and the annual cost of operation for electric water heaters is estimated by 365 x 12.03/EF x Electricity Cost per kWh. The selected heater will be used for only one year and then sold at the market value. Which alternative should be selected? $$\begin{array} { | l | l | l | l | } \hline \text { Alternative } & \text { Electric } & \text { Gas } & \text { Oil } \\\hline \text { Price of water heater } & \$ 28,000 & \$ 23,000 & \$ 25,000 \\\hline \text { EF } & 2.0 & 0.57 & 0.75 \\\hline \text { Fuel cost } & \$ 0.1 / \mathrm { kWh } & \$ 0.00001 / \mathrm { Btu } & \$ 0.00001 / \mathrm { Btu } \\\hline \text { Annual maintenance costs } & \$ 3000 & \$ 2200 & \$ 2500 \\\hline \text { Market value } & \$ 25,200 & \$ 20,700 & \$ 22,500 \\\hline\end{array}$$