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You are the engineer who is responsible about renovation of your company headquarters. Two plans were...

You are the engineer who is responsible about renovation of your company headquarters. Two plans were proposed. Plan X involves remodeling the existing headquarters at a cost of $ 2.25 million. The expected useful life of the existing headquarters after remodeling is 25 years and the annual maintenance and operating (M&O) cost would be $126,000 per year. Plan Y involves building a new headquarters and selling the existing one with a net price of $750,000 three years from now. A total of 5 thousands square meter is required for the new headquarters. The cost of the land is estimated to be $366,000 per thousand square meters. The size of the building is 1 thousand square meter and the building will be 10 stories. The construction cost of the building is $150 per square meter and requires 5 years assuming 2 stories are built per year. In addition, the architect and contractor fees are expected to be $420,000. The expected useful life of the new headquarters is 50 years and the annual maintenance and operating (M&O) cost would be $116,000 per year. If the interest rate is i = 10% per year, evaluate which plan is better on the basis of:

(a) the present worth analysis

(b) the conventional B/C analysis

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Answer #1

Based on the given data, pls find below the workings:

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