![Question 4: [10pts each] The city of Toronto is considering two types of green water filtration subsystems. Design A requires](http://img.homeworklib.com/questions/6c07e660-fa47-11eb-91fa-f3075777e04b.png?x-oss-process=image/resize,w_560)
Homework Answers
a.
NPW of design A = -500000 +(85000- 0.1*500000)*(P/A,6%,15)
= -500000 +(85000- 0.1*500000)*9.712249
= -160071.28
NPW of design B = -250000 +(85000- 75000)*(P/A,6%,15)
= -250000 + 10000*9.712249
= -152877.51
If do-nothing is not an option then design B should be selected as its present cost is lower than A
b.
NPW of design C = -350000 +(85000- 65000)*(P/A,6%,15)
= -350000 + 20000*9.712249
= -155755.02
As present cost of design C is more than B, so answer in part a wont change, Design B is still the best among the given options if do-nothing is not an option
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