Two alternatives for the replacement of the climate maintenance system in an office building are under consideration. The remaining life of the building is 25 years and the discount rate for the owners of the building is 10%.
The costs for the two systems are given in the table below:
|
Heat Pump |
Air conditioner |
| Investment |
$500,000 |
$300,000 |
| Energy cost per year |
$20,000 |
$30,000 |
| Maintenance cost per year |
$10,000 |
$20,000 |
Determine the NPV and EAC for the two alternatives.