Victor and his team work in the facilities engineering and constriction deparment for a lncal university....
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Victor and his team work in the facilities engineering and constriction deparment for a lncal university. They have been provided (2) options to consider legarding the upkeep. functiouality, and overall performance of an older structure on camupus nearing the end of its lifecycle Solutlon (A) - Major renovation to the existing stuchire. Solutlon (B) – Dcmolition & new construction of the aging stricnure completely. To assist in evaluating both optlons, a lifecycle costng report (T.CC) has been prepared below. Glven the following hnformation: 1.) Solve using factor notation & compound interest lables. 3.) T'tilizing the NPV analysis, which alternative (A or B) is the better solutlon that Victor and his leam should consider? Why? Hist Uise Market Discount rate of 8s. 2.) Solve by creating a cash llow lor the 15-year study period. then use net present value (NPV) **Must U'se Escel Total Cost: Year 0: Year 1 11vaai SA: Year 12: Year 13: Xear 14: Year 15: SOLUTION AIRENDVATION) Renovation Costs (YU) S4,700,000 -54,700,000 Retrafit Replacement Operativus & Maiutenance 54,500,000 0.5 watlh 1eswalatiou per ycat 0.5 willa 1 cwalalicu pr ycal 0.5 wallh 16 cwalatieu per ycat 0.5 with 1% cscalataon per 0.5 with 1% esealalon per ycas 1.12 wirh s esealation per year year 0 12 with escalarion per Eleetiteiry Usage 0.12 with s eealaticn per year D 12 with 3% escalarion per yenr 0.12 with Ma escalarion per year year Salvage Valne SOLUTION BNT:W CONSTURCTION) Constinerion Cnsts (Y) S6,500,( -S6,SII.O Operations & Malutenance 0.2 with 1i ocalatioe per ycar 0.2 witlh 15 escolation per year 02 with 1 cscalation per year 02 with 1o escalation per 0.2 with 1o escalation per year Electricity Tisage 0.09 with 3% escalation per yer 0.00 with 3 ercalation per year year 0.00 with 39 ecalarion per 0.00 with 3 escalation per $1,330,000 0.09 with 19 escalation per yeat year year Salvage Valne $2,000,000 S2,000,000 Victor and his team work in the facilities engineering and constriction deparment for a lncal university. They have been provided (2) options to consider legarding the upkeep. functiouality, and overall performance of an older structure on camupus nearing the end of its lifecycle Solutlon (A) - Major renovation to the existing stuchire. Solutlon (B) – Dcmolition & new construction of the aging stricnure completely. To assist in evaluating both optlons, a lifecycle costng report (T.CC) has been prepared below. Glven the following hnformation: 1.) Solve using factor notation & compound interest lables. 3.) T'tilizing the NPV analysis, which alternative (A or B) is the better solutlon that Victor and his leam should consider? Why? Hist Uise Market Discount rate of 8s. 2.) Solve by creating a cash llow lor the 15-year study period. then use net present value (NPV) **Must U'se Escel Total Cost: Year 0: Year 1 11vaai SA: Year 12: Year 13: Xear 14: Year 15: SOLUTION AIRENDVATION) Renovation Costs (YU) S4,700,000 -54,700,000 Retrafit Replacement Operativus & Maiutenance 54,500,000 0.5 watlh 1eswalatiou per ycat 0.5 willa 1 cwalalicu pr ycal 0.5 wallh 16 cwalatieu per ycat 0.5 with 1% cscalataon per 0.5 with 1% esealalon per ycas 1.12 wirh s esealation per year year 0 12 with escalarion per Eleetiteiry Usage 0.12 with s eealaticn per year D 12 with 3% escalarion per yenr 0.12 with Ma escalarion per year year Salvage Valne SOLUTION BNT:W CONSTURCTION) Constinerion Cnsts (Y) S6,500,( -S6,SII.O Operations & Malutenance 0.2 with 1i ocalatioe per ycar 0.2 witlh 15 escolation per year 02 with 1 cscalation per year 02 with 1o escalation per 0.2 with 1o escalation per year Electricity Tisage 0.09 with 3% escalation per yer 0.00 with 3 ercalation per year year 0.00 with 39 ecalarion per 0.00 with 3 escalation per $1,330,000 0.09 with 19 escalation per yeat year year Salvage Valne $2,000,000 S2,000,000
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Below is the calculation for NPV for both solutions Solution B is better compared to solution A as i... View the full answer
Related Book For
Managing Business Process Flows Principles of Operations Management
ISBN: 978-0136036371
3rd edition
Authors: Ravi Anupindi, Sunil Chopra, Sudhakar Deshmukh, Jan Van Mieg
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