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In considering the heating system for a proposed new building, the heating engineer has provided details of two systems in below table: ID Activity System
In considering the heating system for a proposed new building, the heating engineer has provided details of two systems in below table: ID Activity System A System B 1 Boiler a Initial cost $120,000 $140,000 b Overhaul $20,000(5 yearly) $20,000(3 yearly C Major $40,000 (15 yearly) $5,000 (12 yearly) replacement 2 Life of Boiler 30 years 30 years 3 Heat Transfer a Initial cost $42,000 $42,000 b Repairs $2,000 p.a. $2,000 p.a. C Fuel $15,000 p.a. $14,000 p.a. d Staff costs $12,000 p.a. $8,000 p.a. The building is to be used for 30 years by a Charitable Trust, which pays no tax and which has a cost of capital of 5% of net of inflation. Fully evaluate the two options
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