Recommend new heating system to commercial building owner

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Reference no: EM131027067

A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $12,000, a replacement cost of $6,000 and annual operating costs of $3,500, but adds no value to the building when sold. A geothermal heat pump system has a design life of 10 years, an initial cost of $18,000, a replacement cost of $9,000, annual operating costs of $2,500, and increases the value of the building by $5,000, when it is sold at the end of year 15. Determine the PW of costs for the option the engineer should recommend at an interest rate of 5.6%. Express your answer in $ to the nearest $100.

Reference no: EM131027067

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