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  3. the county fire department is considering two opti

The county fire department is considering two options (A and B) for upgrading its aging physical...

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Civil Engineering

The county fire department is considering two options (A and B)for upgrading its aging physical facility. Assume an interest rateof 6% per year and 50-year time period.

Option A: Involves remodeling the existing fire station byspending $2,252,000 now. In addition, the cost for personnel andequipment will be $126,000 per year.

Option B: Calls for buying 5 acres of land for building a newfire station. The cost of the land in that area is estimated to be$366,000 per acre. The size of the new fire station would be 9,000square feet with a construction cost of $151.18 per square foot.Contractor fees are expected to be $421,500(Assume all of the costsfor plan B occur at time 0). In addition, the sale of the old siteis to anticipated to net a positive $500,000 five years in thefuture from today.

Q1: Determine the Present Worth of Plan A and Pan B.

Q2: Which plan is better on the basis of present worthanalysis?

Answer & Explanation Solved by verified expert
3.6 Ratings (595 Votes)
Here we haveRate of interesti 6 per year 006Time periodn 50 years 50PRESENT WORTHOPTION ACost of remodeling C 2252000Cost of    See Answer
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