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Question

Determine the life cycle costs for Alternative A, Alternative B, Alternative C and which alternative

you would recommend to the owner.


The LCC example below summarizes three alternatives being considered

 

Alternative A: do nothing

Alternative B: Renovate existing facility

Alternative C and D: Demolish existing facility and build new facility

The costs (and salvage value if any) over the assumed 25 year for each alternative are given in the table below. Assume a 10 % discount rate compounded annually

The initial costs for the three alternatives at time t=0 are given below (Note that GSF = Gross square foot):

Initial Cost

Construction Cost                                     Quantity GSF                    Price/GSF

 A. Existing Nursing Towers                         200,000                                0            

 B. Renovate Nursing Towers                        200,000                            $100.00

 C. Build New Nursing Towers                       180,000                            $225.00

 D. Demolish Existing Nursing Towers            200,000                            $ 25.00

        

The equipment replacement costs and salvage value (where applicable) are given below:

 

                                                                         Cost of Replacement or Salvage Value

Description                              Years to be Replaced or Salvaged     Alternate A          Alternate B          Alternate C

Air handling Unit                          5                                                             $2,000,000             $2,000,000                 0

Re-roof Nursing Towers               10                                                                  0                         $  250,000        $  500,000    

Salvage Value (New @ 50%)        25                                                                  0                              0                  $20,000,000

 

The annual costs for each alternative are given in the table below:

 

Description                Alternate A   Alternate B          Alternate C

Annual Energy Cost    $1,500,000    $1,250,000       $1,000,000  

M & R Cost               $1,750,000    $1,400,000        $ 700,000

Staffing Cost             $10,000,000  $9,000,000        $7,500,000

 Determine the life cycle costs for Alternative A,  Alternative B,  Alternative C and which alternative you would recommend to the owner.

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