Determine which swimming pool design has lower present cost

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Reference no: EM131032096

The City of Brandon is installing a new swimming pool in the municipal recreation centre. Two designs are under consideration, both of which are to be permanent (i.e., lasting forever). The first design is for a reinforced concrete pool that has a first cost of $ 1 500 000. Every 10 years, the inner surface of the pool would have to be refinished and painted at a cost of $ 200 000. The second design consists of a metal frame and a plastic liner, which would have an initial cost of $500 000. For this alternative, the plastic liner must be replaced every 5 years at a cost of $ 100 000, and every 15 years the metal frame would need replacement at a cost of $ 150 000. Extra insurance of $ 5000 per year is required for the plastic liner (to cover repair costs if the liner leaks). The city’s cost of long - term funds is 5 percent.

Determine which swimming pool design has the lower present cost. TIP: use the capitalized value formula

Reference no: EM131032096

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