Either replace or refurbish the elevator system

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Reference no: EM13937980

You want to either replace or refurbish the elevator system in an office. Option 1 - Referbishing: Refurbishing the elevators will cost $55,000 and extend the life of the elevators another 20 years. Salvage value at the end of 20 years will be $11,000. Annual maintenance costs will be $1,000 per year payable at the end of each period. Option 2 - Replacement: Replacing the elevator system will cost $140,000, with an expected life of 50 years. Maintenance costs will be $400 per year. Salvage value at the end of 50 years will be $28,000. Interest is 4%. Which one is a better option for the organization (Since two options have different lives, choose the best evaluating factor?)

Please show all calculations.

Reference no: EM13937980

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