New heating system to a commercial building owner

Assignment Help Business Economics

Reference no: EM131009787

A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $14,000, a replacement cost of $5,000 and annual operating costs of $3,500, but adds no value to the building when sold. A geothermal heat pump system has a design life of 10 years, an initial cost of $17,000, a replacement cost of $10,000, annual operating costs of $2,500, and increases the value of the building by $6,000, when it is sold at the end of year 15. Determine the PW of costs for the option the engineer should recommend at an interest rate of 6.3%. Express your answer in $ to the nearest $100.

Reference no: EM131009787

Questions Cloud

Equivalent to the cumulative labor-material and energy costs : In a new, highly automated factory, labor costs are expected to decrease at an annual compound rate of 5 %; material costs are expected to increase at an annual compound rate of 6%; and energy costs are expected to increase at an annual compound rate..

Appointed as the advisor of the afghan president : Suppose you have been appointed as the advisor of the Afghan President, H.E. Ashraf Ghani Ahmadzai, the presidents have promised to create 1 million jobs to Afghans in less than one year. You have to come up with at least three ways through which the..

Sovereign wealth funds significantly increased : Through the summer and fall of? 2008, as the global financial crisis began to take? hold, international financial institutions and sovereign wealth funds significantly increased their purchases of U.S. Treasury securities as a safe haven investment. ..

Unleash new investments and economic growth : In the early 1980's President Reagan and Prime Minister Margaret Thatcher promoted neoliberal ideas to unleash new investments and economic growth. What was the basis of many of these policies and how well does it work today?

New heating system to a commercial building owner : A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $14,000, a replacement cost of $..

Determine the net present worth of the equipment : A company plans to invest $12,000 dollars on new equipment with an 8 year life to reduce operating costs. It is estimated that the savings will be $4,000 the first year but decrease by $400 each year for the remainder of the equipment's life. Determi..

Suddenly expect the interest rate to fall in the future : If people suddenly expect the interest rate to fall in the future, then currently,

Asymmetric information in a financial crisis : Which of the following is associated with asymmetric information in a financial crisis?

Unlikely to cause a reduction in lending : Which of the following is unlikely to cause a reduction in lending?

User Account

All Pages