Lighting system based on financial life cycle costing


1) City of Decatur administration is considering refurbishing lighting system of its administration building. After the initial investigation, city procurement office narrowed down choices to following two options:

i) Option 1- is an Urgolight system that costs $500,000 to purchase and install

ii) Option 2- is a conventional system that costs $100,000 to purchase and install

a) Both systems are expected to last for 20 years

b) The energy cost for option 1 is $20,000 and maintenance is $2,000

c) The energy cost for Option 2 is $50,000 and maintenance is $10,000

d) Suppose a discount rate of 4%, and all future cost are paid at year end Which lighting system must the city choose based on financial life cycle costing?

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Finance Basics: Lighting system based on financial life cycle costing
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