Two designs are suitable for housing track and field events. Design N costs $800,000 with annual upkeep costs including maintenance, repair, heat, and janitor service, of $25,000 a year. Its life is expected to be permanent. Design T costs $450,000 with annual upkeep costs for the previous items of $35,000 a year. However, with this design, repairs costing $15,000 will be required every 5 years, and the life will be 25 years with a probable salvage at that date of $50,000. The minimum required rate of return is 10%. Use present worth analysis to compare these two alternatives.
Two designs are suitable for housing track and field events. Design N costs $800,000 with annual upkeep costs including maintenance, repair, heat, and janitor service, of $25,000 a year. Its life is expected to be permanent. Design T costs $450,000 with annual upkeep costs for the previous items of $35,000 a year. However, with this design, repairs costing $15,000 will be required every 5 years, and the life will be 25 years with a probable salvage at that date of $50,000. The minimum required rate of return is 10%. Use present worth analysis to compare these two alternatives.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Two designs are suitable for housing track and field events. Design N costs $800,000 with annual upkeep costs including maintenance, repair, heat, and janitor service, of $25,000 a year. Its life is expected to be permanent. Design T costs $450,000 with annual upkeep costs for the previous items of $35,000 a year. However, with this design, repairs costing $15,000 will be required every 5 years, and the life will be 25 years with a probable salvage at that date of $50,000. The minimum required
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