Question
You are a financial analyst working for Georgetown University. The University needs to replace the air conditioning system in Harbin Hall, a first-year student residency
You are a financial analyst working for Georgetown University. The University needs to replace the air conditioning system in Harbin Hall, a first-year student residency Hall, close to The Hariri Building. The facilities manager has identified two possible systems that could be installed. System A will cost $3 million to install, and will cost an additional $175,000 to operate each year. System B is more expensive and will cost $3.5 million to install, but it will only cost $125,000 to operate each year. Additionally, System B will last for 25 years whereas System A is exepected to last for only 20 years. These proposals now come to you for financial analysis. Which air conditioning system should the University purchase and install? Assume the University uses a 8% discount rate to evaluate capital projects. You must justify your answer with the proper financial analysis to receive full credit.
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