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A client is considering three different floor covering options for a new office building. All coverings are assumed to have the same lives, forecast as
A client is considering three different floor covering options for a new office building. All coverings are assumed to have the same lives, forecast as 6 years, after which they will need to be replaced, and they have no resale value. If the real interest rate for this project is 6%, the installation cost and the running costs at current prices are detailed as follows: COSTS Year Installation Cost Running Cost in year 1 2 3 4 5 6 Floor Covering Option Carpet A Carpet B Carpet C 60 000 66 000 76 000 5 000 3 300 2 000 5 000 3 500 2 000 7 000 6 000 3 000 9 000 8 000 4 500 12 000 11 000 7 000 14 000 12 000 8 000 Calculate the Present Value of the total life cycle costs for each floor covering options. (ii) Which option do you recommend
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