A city government in Arizona is considering a new waste disposal system. It has two options.
Option A needs an outlay of $500,000 and requires O&M costs of $50,000 annually
Option B needs an outlay of $450,000 with O&M cists of $95,000 annually.
Both projects have a 15 year life with no salvage value. At the end of the 15 years the city will re-evaluate the success of their assessed $100,000 per year to cover the new system. The standard interest rate for fund for the city is 6%. Your team has been requested to analyze the systems and decide which system to use. The city is used to seeing cost/benefit ratio analyses so you decide to use BC(i). Which system do you recommend? Show all calculations