02 Mar 1. Allen Auto Group owns corner property that can
1. Allen Auto Group owns corner property that can serve as a parking lot for customers. The parking lot can be made of concrete or asphalt. Concrete will cost $375K initially, have an estimated monthly maintenance cost of $200 starting at the end of the first month of the eighth year, and will last for 20 years. Asphalt is cheaper to install at $250K, costs $700 per month starting at the end of the second year, and will last 10 years and. Using MARR=12% per year compounded quarterly and a 20 year planning horizon, should the parking lot be of concrete or asphalt? a. Use present worth analysis to solve the problem assuming that the projects may be repeated. Solve the problem using the factors. Make sure to explicitly recommend one of the options. (ANS: $- 381,930.16 vs. $-371.961.09 select asphalt) b. Compute the 10 year annual equivalent for the asphalt option using the factors. (ANS: $-51,526.73) c. Compute the 20 year annual equivalent for the asphalt option using the factors assuming that the project can be repeated with the same costs and compare it to the results in part b. (ANS: $-51,526.73) d. Solve the problem using the Rate of Return Analysis. (ANS: Δi* = 0.91%, select asphalt)
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