The Town of Sustainability is planning to rehabilitate the fountain of youth. The fountain has...
60.1K
Verified Solution
Link Copied!
Question
Accounting
The Town of Sustainability is planning to rehabilitate the fountain of youth. The fountain has a pump that can be replaced or refurbished.
Option A:
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 5%. The life of the new pump is 15 years and there is no salvage value at the end of the 15-year life.
Based on the life cycle cost analysis what option do you recommend?
Option B:
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 5% and there is no salvage value at the end of the 15-year life.
Based on the life cycle cost analysis what option do you recommend?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
