Answered step by step
Verified Expert Solution
Question
1 Approved Answer
After completing the requirements and successfully becoming a member of the Professional Engineers and Geoscientists Newfoundland & Labrador (PEGNL), a local manufacturing company hired you
After completing the requirements and successfully becoming a member of the Professional Engineers and Geoscientists Newfoundland & Labrador (PEGNL), a local manufacturing company hired you as a project engineer. The company is planning to expand its capacity and they asked you to consider and recommend one of two feasible alternatives. Alternative A will involve the construction of a new 25,000 m building immediately. The initial investment of this alternative is $2,160,000 and the building will require annual maintenance costs of $9,000. In addition, the building will need to be painted every 15 years (starting in year 15) at a cost of $16,000. Alternative B will involve the construction of a new 12,000 m2 building immediately and an additional 8.000 m in 10 years. The initial investment to build the new 12,000 m building will cost $1,250,000 and the building will require annual maintenance costs of $6,000 for the first 10 years (i.e., until the second phase of the building is built). The additional 8,000 m construction will require an investment of $1,100,000. The annual maintenance costs of the original building and the addition will be $11,000. The renovated building will cost $15,000 to repaint every 15 years starting 15 years after the addition is complete. Your boss told you that the company uses a MARR of 14.5 percent and that you should compare the two alternatives by conducting an annual worth comparison considering infinite lives of the assets. NOTE: Show all your workings, i.e., assumptions, rationale, formulae, cash flow diagrams, etc., to get full credit. After completing the requirements and successfully becoming a member of the Professional Engineers and Geoscientists Newfoundland & Labrador (PEGNL), a local manufacturing company hired you as a project engineer. The company is planning to expand its capacity and they asked you to consider and recommend one of two feasible alternatives. Alternative A will involve the construction of a new 25,000 m building immediately. The initial investment of this alternative is $2,160,000 and the building will require annual maintenance costs of $9,000. In addition, the building will need to be painted every 15 years (starting in year 15) at a cost of $16,000. Alternative B will involve the construction of a new 12,000 m2 building immediately and an additional 8.000 m in 10 years. The initial investment to build the new 12,000 m building will cost $1,250,000 and the building will require annual maintenance costs of $6,000 for the first 10 years (i.e., until the second phase of the building is built). The additional 8,000 m construction will require an investment of $1,100,000. The annual maintenance costs of the original building and the addition will be $11,000. The renovated building will cost $15,000 to repaint every 15 years starting 15 years after the addition is complete. Your boss told you that the company uses a MARR of 14.5 percent and that you should compare the two alternatives by conducting an annual worth comparison considering infinite lives of the assets. NOTE: Show all your workings, i.e., assumptions, rationale, formulae, cash flow diagrams, etc., to get full credit
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started