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5. A small retail business is housed in a structure built 10 years ago and heated by a central gas furnace. Current heating costs average
5. A small retail business is housed in a structure built 10 years ago and heated by a central gas furnace. Current heating costs average $500 per year and the furnace is in need of an overhaul, including replacement of the fan motor and filter system. The cost of this work, which is expected to be $2,100, will improve furnace efficiency, hence reduce energy costs by approximately 10%. The furnace could also be replaced by either of two new units. The first is a modified version of the current system, which would cost $4,200 and is expected to reduce energy costs by 25%. The second is a pulse-jet system costing $7,000 and providing a 35% saving. All three systems would be expected to last 10 years with no maintenance costs other than routine cleaning and filter replacement. At the end of that time, the current system would have no salvage value and the new system would probably be worth about 20% of the purchase price. The current system has a salvage value of $500 which could be applied as a trade-in. Using MARR of 20% and the outsider viewpoint" method, determine which alternative should be selected
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