The Autocar E3 refuse truck has an energy recovery system developed by Parker Hannifin LLC that is expected to reduce fuel consumption by 50%. Pressurized fluid flow carbon fiber-reinforced accumulator tanks to two hydrostatic motors that propel the vehicle forward. ( the truck recharges the accumulators when it brakes). The fuel cost for a regular refuse truck is $900 per month. How much can a private waste-hauling company afford to spend now on the recovery system, if it wants to recover its investment in 3 years plus a return of 14% per year, compounded semiannually? Assume no interpterion compounding.
| Normal fuel cost | 900 |
| Savings through recovery system | 50% |
| Amount of saving per month | 450 |
| Half yearly saving (450*6) | 2700 |
| Compounding rate p.a. | 14% |
| Half yearly compounding rate (14%/2) | 7% |
| Calculation of discount factor | 1/(1+Rate)^No. of periods |
| No. of years | 3 |
| No. of periods = 3*2 (Half year) | 6 |
| Period | Saving | Discount factor | Present value of saving |
| 1 | 2,700.00 | 0.9346 | 2,523.36 |
| 2 | 2,700.00 | 0.8734 | 2,358.28 |
| 3 | 2,700.00 | 0.8163 | 2,204.00 |
| 4 | 2,700.00 | 0.7629 | 2,059.82 |
| 5 | 2,700.00 | 0.7130 | 1,925.06 |
| 6 | 2,700.00 | 0.6663 | 1,799.12 |
| Maximum amount to be spent on the recovery system | 12,869.66 | ||
The Autocar E3 refuse truck has an energy recovery system developed by Parker Hannifin LLC that...