Two feasible alternatives under consideration

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CB Electronix needs to expand its capacity. It has two feasible alternatives under consideration. Both alternatives will have essentially infinite lives. Construct a new building of 20 000 square metres now. The first cost will be $ 2 000 000. Annual maintenance costs will be $ 10 000. In addition, the building will need to be painted every 15 years (starting in 15 years) at a cost of $ 15 000. Alternative 2: Construct a new building of 12 500 square metres now and an additional 7500 square metres in 10 years. The first cost of the 12 500- square-metre building will be $ 1 250 000. The annual maintenance costs will be $ 5000 for the first 10 years (i.e., until the addition is built). The 7500- square- metre addition will have a first cost of $ 1 000 000. Annual maintenance costs of the renovated building (the original building and the addition) will be $ 11 000. The renovated building will cost $ 15 000 to repaint every 15 years after the addition is done). Carry out an annual worth comparison of the two alternatives. Which is preferred if the MARR is 15 percent?

Reference no: EM131005455

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