5 us government considering building apartments government employees working foreign country
5. The U.S. government is considering building apartments for government employees working in a foreign country and living in locally owned housing. A comparison of two possible buildings indicate the following:
| Building X | PWx benefits | PWx costs | Building Y | PWy benefits | PWy costs | |
|---|---|---|---|---|---|---|
|
Investment
|
$15,400,000
|
$11,000,000
|
||||
| Annual maintenance costs |
375,000
|
200,000
|
||||
| Annual Savings over rental payments |
1,800,000
|
1,600,000
|
||||
| Salvage value |
9,240,000
|
6,600,000
|
||||
|
PRESENT WORTH |
$ | $ | $ | $ | ||
|
BCR: PWb/PWc |
BCRx | = | BCRy | = |
Use MARR = 10%, and a 20-year study period to compute BCR for each investment. Note that if the BCR of either alternative is < 1, no incremental analysis is required since one does not qualify as a viable project. (Blanks are provided in the tables to suggest a method of “keeping up” with your calculations). DO NOT COMBINE ANNUAL BENEFITS AND COSTS since you must keep them separted to calculate the PW of the benefits and the PW of the cost SEPARATELY.
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