Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,625,000, has annual operating and maintenance costs of $950,000, and requires overhauls every 5 years at a cost of $1,650,000. Design B is more sophisticated, including computer controls; it has an initial cost of $5,675,000, has annual operating and maintenance costs of $600,000, and requires overhauls every 10 years at a cost of $2,500,000.
Using a 8.0 %/year interest rate, determine the capitalized cost for each design.
Recommend which design should be chosen