A firm must decide between constructing a new facility or renting a comparable office space. There are two random outcomes for acquiring?space, as shown in figure below. Each would accommodate the expected growth of this company over the next 10 years. The cost of rental space is expected to escalate over the 10 years for each rental outcome.
The option of constructing a new facility is also defined in figure below. An initial facility could be constructed with the costs shown. In five ?years, additional space will be required. At that?time, there will be an option to build an office addition or rent space for the additional space requirements. The probabilities for each alternative are shown. MARR for the situation is 12?% per year. A PW analysis is to be conducted on the alternatives. Which course of action should be?recommended? Note: At?2, the ?PW(12?%) of the upper branch is ??$5,163.00 k and the ?PW(12?%) for the lower branch is ??$4,118.00 k.
A firm must decide between constructing a new facility or renting a comparable office space. There are two random outcomes for acquiring space, as shown in figure below. Each would accommodate the expected growth of this company over the next 10 years. The cost of rental space is expected to escalate over the 10 years for each rental outcome. The option of constructing a new facility is also defined in figure below. An initial facility could be constructed with the costs shown. In five years, additional space will be required. At that time, there will be an option to build an office addition or rent space for the additional space requirements. The probabilities for each alternative are shown. MARR for the situation is 12% per year. A PW analysis is to be conducted on the alternatives. Which course of action should be recommended? Note: At 2, the PW(12%) of the upper branch is - $5, 163.00 k and the PW(12%) for the lower branch is - $4, 118.00 k. i Click the icon to view the decision tree diagram. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 9% per year. The PW for building the additional space is $ thousand. (Round to the nearest whole number.) The PW for renting the additional space is $ thousand. (Round to the nearest whole number.) It's more economical to the additional space. Calculate the PW values at 1. PW bottom (12%) = $ thousand (Round to the nearest whole number.) PWtop(12%) = $ thousand (Round to the nearest whole number.) It's more economical to a new facility.0&M = Annual Operating and maintenance expense 0&M = $860 k /year (10 years) 0.45 Inflates at 9% / year R O&M = $700 k /year (10 years) Inflates at 12% / year Investment = - $25 k D&M = $230 k /year (5 yr) 0.80 BA Investment = - $5.7 mil Resale + $2.3 mil O&M = $145 k / year (5 yr) 0.20 1 at BOY 10 PW Investment = - 5, 163 k = - $10.6 mil Resale + $19 mil 2 at BOY 10 Investment - 527 k PW 0&M = $1.0 mil / year (5 yr) 0.55 = - 4,118 k RA O&M = $1.3 mil /year (5 yr) B O&M = $200 k/yr (5 yr) B - Build New Facility 0&M = $150 k /year (10 years) 0.75 R - Rent New Facility BA - Build Addition 0&M = $280 k/year (10 years) 0.15 RA - Rent Addition k - thousands mil - millionsDiscrete Compounding; i=12'i'i: Single Payment Uniform Series Compound Compound Sinking Capital Amount Present Amount Present Fund Recovery:r Factor Worth Factor Factor Worth Factor Factor Factor To Find F To Find F" To Find F To Find P To Find A To Find A Given P Given F Given A Given A Given F Given P FiP PiF HA HA AiF AFP 1.1288 8.8525l 1.8888 8.8525 1.8888 1.1288 1.2544 8.?5?2 2.1288 1.5581 8.4?1? 8.551? 1.4845 8 .?1 18 3.3?44 2.4818 8.2553 8.4153 1.5?35 8.5355 4.??53 3.83?3 8.2852 8.3252 1.?523 8.55?4 5.3528 3.5848 8.15?4 8.2??4 1.5?38 8.5855 8.1 152 4.1 114 8.1232 8.2432 2.218? 8.4523 18.8858 4.5538 8.8551 8.2151 2.4?58 8.4835 12.255? 4.55?5 8.8813 8.2813 2.??31 8.3585 14.??5? 5.3282 885?? 818?? 3.1858 8.3228 1?.548? 5.5582 8.85?8 8.1??8 3.4?85 8.28?5 28.5545 5.53?? 8.8484 8.1584 3.8558 8.255? 24.1331 5.1544 8.8414 8.1514 4.3535 8.2252 28.8251 5.4235 8.835? 8.155? 4.88?1 8 .2845 32.3525 5.5282 8.8385 8.1585 5.4?35 8.182? 3?.2?5? 5.8185 8.8258 8.1458 H 1 2 3 4 5 5 ? 8 5 Discrete Compounding; i= 9% Single Payment Uniform Series Compound Compound Sinking Capital Amount Present Amount Present Fund Recovery Factor Worth Factor Factor Worth Factor Factor Factor To Find F To Find P To Find F To Find P To Find A To Find A Given P Given F Given A Given A Given F Given P N FIP PIF FIA PIA A/F AIP 1.0900 0.9174 1.0000 0.9174 1.0000 1.0900 1. 1881 0.8417 2.0900 1.7591 0.4785 0.5685 1.2950 0.7722 3.2781 2.5313 0.3051 0.3951 1.4116 0.7084 4.5731 3.2397 0.2187 0.3087 1.5386 0.6499 5.9847 3.8897 0.1671 0.2571 SOOOJAWNS 1.6771 0.5963 7.5233 4.4859 0.1329 0.2229 1.8280 0.5470 9.2004 5.0330 0. 1087 0.1987 1.9926 0.5019 11.0285 5.5348 0.0907 0.1807 2.1719 0.4604 13.0210 5.9952 0.0768 0.1668 2.3674 0.4224 15.1929 6.4177 0.0658 0.1558 11 2.5804 0.3875 17.5603 6.8052 0.0569 0.1469 12 2.8127 0.3555 20.1407 7.1607 0.0497 0.1397 13 3.0658 0.3262 22.9534 7.4869 0.0436 0.1336 14 3.3417 0.2992 26.0192 7.7862 0.0384 0.1284 15 3.6425 0.2745 29.3609 8.0607 0.0341 0.1241
