Question
Grady's Garden Shed is upgrading its watering system. Grady is trying to choose between two different products. The Water Factor has an initial cost of
Grady's Garden Shed is upgrading its watering system. Grady is trying to choose between two different products.
The Water Factor has an initial cost of $120910. At the end of life, the system can be salvaged for $11410. Maintenance of the system is estimated to cost $1651 each year. The Water Factor will save $74693 per year in water costs. This system will require approximately 563 hours of employee time each year to monitor the system and perform maintenance and repairs. The Water Factor has a useful life of 3 years.
The WetThrift has an initial cost of $149531. At the end of life, the system can be salvaged for $45531. The WetThrift uses much less water, but it will require more employee hours to adjust settings and maintain it. Maintenance is estimated to cost $1774 each year. The WetThrift will save $93084 per year in water costs. This system will require approximately 2708 hours of employee time each year. The WetThrift has a useful life of 4 years.
Grady pays his employees $16 per hour.
Comparing the two alternatives using present worth analysis (see the video lecture "Multiple Projects - Unequal LifeLinks to an external site." if you're unsure what that means), what is the present worth of the Water Factor? Use an interest rate of 2% compounded annually to make your calculation.
Enter your answer in this form: 12345
Round your answer. Do not use a dollar sign ("$"), any commas ("$"), or a decimal point (".").
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