Modernization of pumping station in water treatment facility

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Currently, two options are available for modernization of a pumping station in a water treatment facility. Option 1 is to install a pumping system which is more durable at a cost of $20,000. With this option, the system will require to be replaced every 15 years. The maintenance cost for this system runs at $4,000 every five years. Option 2 is to install a cheaper pumping system. It costs $12,000. However, the system must be replaced every 6 years. The maintenance cost for this system is $1,600 every 2 years. Compute the present worth capitalized cost for each option and decide which one would be to our advantage. The interest rate is at 7% per year.

Reference no: EM13848188

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