A client is considering replacing his heating system. System A is the standard scheme whereas system B relies on additional insulation being provided. System A Initial costs Boiler 160,000 Pipework and units 48,000 Insulation 12,000 Recurring costs System B 170,000 42,000 32,000 Repairs (per annum) Replacement Overhaul Fuel (per annum) 3,000 40,000 (every 20 years) 15,000 (every 5 years) 15,000 2,800 32,000 (every 20 years) 15,000 (every 5 years) 11,000 Evaluate the two systems and make a recommendation. The assuming the remaining expected life of each building is 25 years and the discount rate to be used is 6%. (Extracts from NPV tables has been attached.) Table II Present Value Factors: Present Value of 1 (1+r)" Discounted Rates (r)% Periods (n) 1 2 3 0.971 0.942 0.889 0.840 0.751 4 0.961 0.924 0.855 0.792 0.683 5 0.951 0.906 0.822 0.747 6 0.942 0.888 0.790 7 0.933 0.871 0.760 8 0.923 0.853 0.731 9 0.914 0.837 0.703 0.592 0.424 0.361 0.284 10 11 12 13 14 15 16 17 18 19 0.130 0.081 0.069 0.051 0.038 0.028 0.018 0.016 0.618 0.009 0.853 0.728 0.534 0.394 0.218 0.163 0.107 0.844 0.714 0.513 0.371 0.198 0.146 0.093 0.836 0.700 0.494 0.350 0.180 0.828 0.686 0.475 0.331 0.164 0.116 0.070 0.060 0.043 0.031 0.023 0.014 0.012 0.618 0.007 0.820 0.673 0.456 0.312 0.149 0.104 0.061 0.051 0.037 0.026 0.019 0.012 0.010 0.618 0.005 0.811 0.660 0.439 0.294 0.135 0.093 0.053 0.044 0.031 0.022 0.015 0.009 0.008 0.618 0.004 0.803 0.647 0.422 0.278 0.123 0.083 0.046 0.038 0.026 0.018 0.013 0.007 0.006 0.618 0.003 0.015 0.010 0.006 0.005 0.618 0.002 0.013 0.008 0.005 0.004 0.618 0.002 0.010 0.007 0.004 0.003 0.618 0.001 0.795 0.634 0.406 0.262 0.112 0.074 0.040 0.033 0.022 $ 0.788 0.622 0.390 0.247 0.102 0.066 0.035 0.028 0.019 0.780 0.610 0.375 0.233 0.092 0.059 0.030 0.024 0.016 1% 2% 4% 6% 10% 12% 15% 16% 18% 20% 22% 25% 26% 28% 30% 0.990 0.980 0.962 0.943 0.909 0.893 0.870 0.862 0.847 0.833 0.820 0.800 0.794 0.781 0.769 0.980 0.961 0.925 0.890 0.826 0.797 0.756 0.743 0.718 0.694 0.672 0.640 0.630 0.561 0.592 0.712 0.658 0.641 0.609 0.579 0.551 0.512 0.500 0.640 0.455 0.636 0.572 0.552 0.516 0.482 0.451 0.410 0.397 0.610 0.350 0.621 0.567 0.497 0.476 0.437 0.402 0.370 0.328 0.315 0.621 0.269 0.705 0.564 0.507 0.432 0.410 0.370 0.335 0.303 0.262 0.250 0.617 0.207 0.665 0.513 0.452 0.376 0.354 0.314 0.279 0.249 0.210 0.198 0.619 0.159 0.627 0.467 0.404 0.327 0.305 0.266 0.233 0.204 0.168 0.157 0.618 0.123 0.263 0.225 0.194 0.167 0.134 0.125 0.618 0.094 0.905 0.820 0.676 0.558 0.386 0.322 0.247 0.227 0.191 0.162 0.137 0.107 0.099 0.618 0.073 0.896 0.804 0.650 0.527 0.350 0.287 0.215 0.195 0.162 0.135 0.112 0.086 0.079 0.618 0.056 0.887 0.788 0.625 0.497 0.319 0.257 0.187 0.168 0.137 0.112 0.092 0.069 0.062 0.618 0.043 0.879 0.773 0.601 0.469 0.290 0.229 0.163 0.145 0.116 0.093 0.075 0.055 0.050 0.618 0.033 0.870 0.758 0.577 0.442 0.263 0.205 0.141 0.125 0.099 0.078 0.062 0.044 0.039 0.618 0.025 0.861 0.743 0.555 0.417 0.239 0.183 0.123 0.108 0.084 0.065 0.051 0.035 0.031 0.618 0.020 0.093 0.071 0.054 0.042 0.028 0.025 0.618 0.015 0.080 0.060 0.045 0.034 0.023 0.020 0.618 0.012