(a) A developer has two design options for building a small warehouse. One involves the use of timber, another uses structural steel. Details of the costs () and revenues associated with both options are given in Table 4. Assumes that identical machines having the same costs will replace the assets associated with a given option on a cyclical basis. Compare the two options on the basis of their present worth, assuming an interest rate

of 12%.

Table 4

Timber- Option A Steel- Option B

Initial cost () 40,000 60,000

Annual maintenance

cost () 6,500 3,500

Residual value () 5,000 0

Economic life (Years) 10 15

(b) Apart from financial criteria, what other evaluation criterion should this company use

to evaluate this warehouse project?