Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,525,000, has an...

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Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,525,000, has annual o

business economics

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Answer 1

Answer #1

MARR = 7%

Capitalized Cost of alternative 1 = 2525000 + 900000 / 0.07 + [1250000 * (A/F, 7%,5)] / 0.07

= 2525000 + 900000 / 0.07 + [1250000 * 0.173891] / 0.07

= 18487333.83 ~ 18487334 (Nearest Dollar)

Capitalized Cost of alternative 2 = 5350000 + 450000 / 0.07 + [3325000 * (A/F, 7%,10)] / 0.07

= 5350000 + 450000 / 0.07 + [3325000 * 0.072378] / 0.07

= 15216502.81 ~ 15216503 (Nearest Dollar)

As Capitalized Cost of alternative 2 is lower, it should be selected

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Answer 2

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