Question
City administration is considering refurbishing the lighting system of its administration building.
After initial investigation, the city procument office has narrowed down the choices into the following two options:
Option 1 is a Urgolight system, which costs $500,000 to purchase and instrall.
Option 2 is a convention system, which costs $100,000 to purchase and instrall.
The system is expected to last for 20 years
The energe and maintenance cost for Option 1 is $20,000 and $2,000.
The energe and maintenance cost for Option 1 is $50,000 and $10,000.
Assume all gas costs paid at end of year.
Real discount rate: 4%
Which lighting system should the city selected based on financial consideration.
Note: please use LCC analysis to facilitate the decision-making.