04.05-PR002 Video Solution Video Solution Two incinerators are being considered by a waste management company. Design A has an initial cost of $2,500,000, has annual operating and maintenance costs of $800,000, and requires overhauls every 5 years at a cost of $1,250,000. Design B is more sophisticated, including computer controls; it has an initial cost of $5,750,000, has annual operating and maintenance costs of $600,000, and requires overhauls every 10 years at a cost of $3,000,000. Using a 5%/year interest rate, determine the capitalized cont for each design and recommend which should be chosen. V Answer A: TOTAL CC = $2,500,000+ $16,000,000+ $4,524,369.95 = $23,024,369.95 B: TOTAL CC = $5,750,000+ $12,000,000+ $4,770,274.50 = $22,520,274.50 DESIGN B IS PREFERRED