Problem:

The professors office area in the Antonio Lucchetti building has a problem associated with the air conditioning system. Currently the existing system is a centrifuge. The Buildings and Grounds Department is evaluating two alternatives to address the situation. (Question are at the end of the problem) (Here is the second alternative only) (the link for the first alternative is this one:https://www.chegg.com/homework-help/questions-and-answers/problem-professor-s-office-area-antonio-lucchetti-building-problem-associated-air-conditio-q59353841)

The second alternative consists of the installation of a system of individual units consisting of four condensers and 41 consoles.

The initial costs are as follows:

Cost Item	Unit Cost	Units	Total Cost	Useful Life
Condenser MDV 400	$9,000	2		6 years
Condenser MDV 450	$9,700	2		6 years
Consolas 12,000 BTU	$700	31		6 years
Consoles 19,000 BTU	$900	10		6 years
Materials***			$35,000	n/a
Labor for installation concept ****			$18,000	n/a

*** Includes materials for the insulation system. The cost of materials for the replacement of the consoles is obviated.

**** Replacement labor is reduced to 80% of original cost.

System maintenance consists of:

Maintenance work	Personnel requirements	Units	Duration of work	Monthly salary	Cost of parts to replace
Console cleaning and filter replacement once a year	1 technician 1 helper	41	1.5 horas	$1,550 $1,515	$30/unit
Condenser cleaning once a year	1 technician 1 helper	4	1 hora	$1,550 $1,515
Console extraction pump replacement, every 3 years	1 technician 1 helper	41	da	1 technician 1 helper	$50/unit

Maintenance is carried out by personnel from the Refrigeration Workshop assigned to the Department of Buildings and Land of the land. The total hours that a regular employee works in the Campus is 1,950 hours per year, at a rate of 7.5 hours per day. (They will need to calculate the cost associated with the time staff spend on maintenance tasks for this particular equipment.)

The additional costs associated with the operation of the console system are as follows:

Cost item	Frequency	Cost
Refrigerant Pipe Insulation Replacement	Every 12 years	$12,000

The costs associated with the electrical consumption of the console system are the following:

The cost for electricity consumption of the complete console system is $175 per day, at a rate of 12 hours per day.

Assume that the system will operate for 260 business days annually.

1. Perform a present value analysis to select the best alternative

a. Consider that the replacements will be for identical units

b. The residual value of the equipment corresponds to the cost of disposal of the unit

c. Analyze a 30-year horizon

d. Consider an interest rate of 6%

2. Perform a sensitivity analysis, keeping the parameters of the centrifuge system constant, and changing the useful life of the console system from 5 years to a maximum of 10 years.

3. Consider that the equipment will be purchased by a manufacturing industry.

a. Determine the internal rate of return at which both alternatives are equally attractive.

b. Assume that the previously analyzed console system will be used to provide air conditioning in a manufacturing industry that generates a taxable income of $ 3,000,000 to $ 5,000,000 annually. It will be installed in a certain production area that generates an annual gross income of $ 450,000. The operating costs are $ 125,000 per year. Depreciate the console system, in operational state, using the Modified Accelerated Capital Recovery System and determine the after-tax cash flow. Calculate the internal rate of return before and after taxes. Perform the scan only for the first time the equipment is installed (First cycle, depending on the life)

Use excel for this problem, please leave the formulas used on the tables so I can see and understand better what is happening