A city is considering buying a piece of land for $500,000 and constructing an office complex on it. Their planning horizon is 20 years. Three mutually exclusive building designs (shown below) have been drawn up by an architectural firm. Use the PW method and a MARR of 10% per year to determine which alternative, if any, should be recommended to the city council. Cost of the building, including cost of the land Resale value of land and building at end of 20-year planning horizon Annual net rental income (after deducting all operating expenses) Design A Design B Design.co $1,300,000 $1,700,000 $3,500,000 $500,000 $900,000 $2,000,000 $120,000 $300,000 $450,000
A city is considering buying a piece of land for $500,000 and constructing an office complex on it. Their planning horizon is 20 years. Three mutually exclusive building designs (shown below) have been drawn up by an architectural firm. Use the PW method and a MARR of 10% per year to determine which alternative, if any, should be recommended to the city council. Cost of the building, including cost of the land Resale value of land and building at end of 20-year planning horizon Annual net rental income (after deducting all operating expenses) Design A Design B Design.co $1,300,000 $1,700,000 $3,500,000 $500,000 $900,000 $2,000,000 $120,000 $300,000 $450,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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What is the PW of all design?
Transcribed Image Text:A city is considering buying a piece of land for $500,000 and constructing an office complex on it. Their
planning horizon is 20 years. Three mutually exclusive building designs (shown below) have been drawn up by an architectural firm.
Use the PW method and a MARR of 10% per year to determine which alternative, if any, should be recommended to the city council.
Cost of the building, including cost of the land
Resale value of land and building at end of 20-year planning horizon
Annual net rental income (after deducting all operating expenses)
Design A
Design B Design.co
$1,300,000 $1,700,000 $3,500,000
$500,000 $900,000 $2,000,000
$120,000 $300,000 $450,000
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