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).