A city in the GTA is in the process of expanding its municipal waste collection services...

 

Transcribed Image Text:

A city in the GTA is in the process of expanding its municipal waste collection services and is considering these two alternatives which will provide a similar service: a. In-house: Spend $1,000,000 on purchasing new vehicles and equipment, which will require major maintenance of $250,000 in 20 years time and provide no scrap value at the end of their life. Additionally, 10 employees with an annual salary of $90,000 will need to be hired. b. Outsource: Pay an external company $300,000 each quarter (4x a year) to provide the same level of service Assuming that the annual MARR used by the City of Guelph is 9%, find which of the two options is preferable (financially) using a present worth analysis over a 30-year time period. A city in the GTA is in the process of expanding its municipal waste collection services and is considering these two alternatives which will provide a similar service: a. In-house: Spend $1,000,000 on purchasing new vehicles and equipment, which will require major maintenance of $250,000 in 20 years time and provide no scrap value at the end of their life. Additionally, 10 employees with an annual salary of $90,000 will need to be hired. b. Outsource: Pay an external company $300,000 each quarter (4x a year) to provide the same level of service Assuming that the annual MARR used by the City of Guelph is 9%, find which of the two options is preferable (financially) using a present worth analysis over a 30-year time period.

Answer rating: 100% (QA)

SOLUTION To determine which option is preferable financially we need to calculate the present worth ... View the full answer