Three alternatives are being considered for an air cleaning system. All three systems have a lifeof 10 years with no salvage value. System A has an initial cost of $29,000. During the first fiveyears of operation, the annual costs to operate system A are $5,000. During the second five years,the annual cost of system A increases to $16,000. System B has an initial cost of $43,000. Theannual cost to operate system B is $4,000, however, after the first year, this cost increases by$1,600 per year. System C has an initial cost of $58,000 with an annual cost of $2,400. System Crequires two upgrades: one during year 4 which costs $6,000, and the other during year 8 whichcosts $3,000. The MARR for this project is 17%. Determine which air cleaning system should beinstalled based on an economic analysis.
Three alternatives are being considered for an air cleaning system. All three systems have a life
of 10 years with no salvage value. System A has an initial cost of $29,000. During the first five
years of operation, the annual costs to operate system A are $5,000. During the second five years,
the annual cost of system A increases to $16,000. System B has an initial cost of $43,000. The
annual cost to operate system B is $4,000, however, after the first year, this cost increases by
$1,600 per year. System C has an initial cost of $58,000 with an annual cost of $2,400. System C
requires two upgrades: one during year 4 which costs $6,000, and the other during year 8 which
costs $3,000. The MARR for this project is 17%. Determine which air cleaning system should be
installed based on an economic analysis.
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