Reference no: EM131007706

The Murphy County Fire Department is considering two options for upgrading its aging physical facilities. Plan A involves remodeling the ?re stations on Alameda Avenue and Trowbridge Boulevard that are 57 and 61 years old, respectively. (The industry standard is about 50 years of use for a station.) The cost for remodeling the Alameda station is estimated at $952,000 while the cost of redoing the Trowbridge station is $1.3 million. Plan B calls for buying 5 acres of land somewhere between the two stations, building a new ?re station, and selling the land and structures at the previous sites. The cost of land in that area is estimated to be $366,000 per acre. The size of the new ? re station would be 9000 square feet with a construction cost of $151.18 per square foot. Contractor fees for overhead, pro?t, etc. are expected to be $340,000, and architect fees will be $81,500. (Assume all of the costs for plan B occur at time 0.) If plan A is adopted, the extra cost for personnel and equipment will be $126,000 per year. Under plan B, the sale of the old sites is anticipated to net a positive $500,000 ?ve years in the future. Use an interest rate of 6% per year and a 50 year useful life for the remodeled and new stations to determine which plan is better on the basis of a present worth analysis.