Question 7A construction company is deciding if they should make a new building bronze, silver, or goldLEED-certified, or not at all. Regardless of the level of certification, this new building willgenerate extra annual revenues of $40,000 starting at the end of the first year due to plannedbusiness operation. In terms of operational cost, each option offers different levels of annualenergy savings (can be taken as annual incomes), but also different operation and maintenancecosts. Please also note that a building with no certification will have no energy savings, but fullenergy costs. Further, the government offers different tax credits depending on the level ofenvironmental impact. Please note that all annual costs and savings begin at the end of year 3 andextend until the end of the operation life. The buildings are intended to operate for 20 years, andthe company has a minimum attractive rate of return (MARR) of 5%. The following data isavailable for each option:AnnualEnergySavingsOperation andMaintenanceEnvironmental SalvageCertification Initial CostTax CreditvaluecostsNoCertification S331,000$687,000$952,000$1,056,000-S13,000$17,000$31,000S53,000$9,000$14,000$23,000$31,000Szero$5,000$11,000$16,000$191,000$446,000$715,000$785,000BronzeSilverGoldUsing the Incremental IRR Analysis Method, find the best alternative.

Calculation of Annual Income of No Certification, Bronze , Silver and Gold:: No Certification…

Answered: A construction company is deciding if…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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