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You are a manager choosing between two designs for new industrial facilities. Given the facts below, calculate the LCC for each alternative and make a recommendation. For each alternative: The time horizon is 30yrs. Real interest rate is 3% Nominal interest rate is 6% Assume the cash flows are EOY cash flows and happen once per year starting at year 1. Each alternative has a construction duration of 2 years. The construction starts at January 2021. The building location is in Texas. There is no salvage value for each alternative design. *Note. Salvage value is NOT residual value check notes The bank is providing a loan at 8% compounded annually for the construction costs. >You must pay pack the loan in 15 equal installments starting at the end of the first year of operations (i.e., your first flow will be on year 3). Alternative One Construction cost is $4 million USD The mechanical system has the following parameters: >Lifespan is 35 years starting at the service date (The first cost incurred at year 3, because it has been in service for 1 year.) >Initial cost is $250,000 (which is included in the $4 million construction cost) Operations and maintenance are $125,000 per year (not including energy) Alternative Two Construction cost is $4.4 million HVAC > Lifespan is 20 years starting at the service date > The original costs are included in construction costs. > The estimated replacement cost is $375,000 Other elements of the mechanical systems (everything except HVAC) > Initial cost of $50,000 (included in the constructions costs) > Lifespan of the mechanical system is 35 years starting at the service date > There is a utility rebate of $50,000 for energy savings payable when the building is put in service Operations and maintenance are $115,000 per year (not including energy)

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