The Town of Sustainability is planning to rehabilitate the fountain of youth. The fountain has a pump that can be replaced or refurbished.

1. Option A: (3 points)

Replace the pump with a new pump at a cost of $12,000.

In years 7 and 14 the pump needs maintenance at a cost of $2,300 each occurrence. The interest rate is 6%. The life of the new pump is 15 years and there is no salvage value at the end of the 15 year life.

2. Option B: (3 points)

Maintain the existing pump based on the following schedule:

Today, $6,500

Year 3, $400

Year 5, $1,500

Year 8, $900

Year 12, $1,200

Year 14, $1,700

The interest rate is 6% and there is no salvage value at the end of the 15 year life.

3. Based on the life cycle cost analysis what option do you recommend? (1 point)