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IBM is considering an environmentally conscious green building at one of its new production facilities. The company will decide among three different green designs for
IBM is considering an environmentally conscious green building at one of its new production facilities. The company will decide among three different green designs for the facility, and each of the final mutually exclusive concepts for the facility results in different costs and savings. These three concepts are summarized below. IBM uses 10% per year as its profitability benchmark (hurdle rate) for such comparisons. Which facility concept should be selected? Concept A Concept B Concept C Initial investment $85,000,000 $100,000,000 $50,000,000 Net annual savings 11,300,000 12,000,000 7,500,000 Salvage (market) value 85,000,000 100,000,000 50,000,000 Useful life 60 years 60 years 40 years
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