A process furnace upgrade costs $100,000 and will save $20,000 per year in fuel over its 10-year lifetime. Fuel prices are projected to escalate 8% per year over this period.
- Draw the cash flow diagram.
- Find the simple payback SP.
- Find the rate of return ROR.
- Assuming a discount rate of 5%, find the net present value NPV of savings.
- Find the return on investment ROI (also called the internal rate of return IRR in Excel).