Assuming that the owner wants to have a return of investment of 20%, select the best option that you will recommend to the owner.

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You were task to perform a Technical Study on whether to retrofit or replace an existing water-cooled chiller unit.

Option 1: Retrofit the Existing Chiller Unit. The existing chiller unit has the following information. Retrofit Cost: $50,000.00. Will prolong useful life with additional 10 years. (Useful life is 25 years and the unit is already 20 years in operation). Yearly Energy Cost was estimated to be $10,000.00 annually with a yearly increase of 3%. Maintenance cost after retrofit is $5,000.00 annually with an escalating increase of 5% every year until the added useful life has been consumed.

Option 2: Replace the Chiller Unit with a new one. Initial Cost: $120,000.00 with a useful life of 25 years. The maintenance cost is $2,500.00 with an escalating increase of 1% every year. Yearly Energy Cost was estimated to be $5,000.00 with an increase of 1% every year.