Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,500,000, has annual operating and maintenance costs of $800,000, and requires overhauls every 5 years at a cost of $1,250,000. Design B is more sophisticated, including computer controls; it has an initial cost of $5,750,000, has annual operating and maintenance costs of $600,000, and requires overhauls every 10 years at a cost of $3,000,000. Using a 5% per year interest year, design the capitalized cost for each design and recommend which should be chosen.

Answer rating: 100% (QA)

Heres a breakdown of the capitalized cost for each design and a recommendation Design A Initial cost 2500000 Annual costs excluding overhaul Operating ... View the full answer