(Answered) A city government is considering two types of town-dump

Management Studies

"A city government is considering two types of town-dump sanitary systems. Design A requires an initial outlay of $460,000 with annual operating and maintenance costs of $33,000 for the next 16 years. Design B calls for an investment of $150,000 with annual operating and maintenance costs of $60,000 per year for the next 16 years. Fee collections from the residents for both designs would be $72,000 per year. The interest rate is 8%, and no salvage value is associated with either system.

In order to determine which system should be selected, calculate the incremental profitability index (see example 16.4). Enter the incremental PI(i) of A-B rounded to the nearest hundredth as your answer."

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