An expansion of the current BIM (Building Information Model) software has been proposed to First Financial, the

Question:

An expansion of the current BIM (Building Information Model) software has been proposed to First Financial, the building’s owner. A total installed cost of $120,000 is expected to generate additional savings of $40,000 per year for 10 years, after which time the software will be replaced with no salvage value. The annual M&O cost is expected to be $10,000 the first year and increase by an arithmetic gradient G between $1000 and $5000 per year thereafter. Determine if the expanded BIM is sensitive to gradient increases of $1000 (optimistic), $3000 (most likely), and $5000 (pessimistic) per year. Use AW analysis and a MARR of 10% per year.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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