Question: Using future worth analysis, which of the following alternatives is the best choice for a hospital project intended to reduce the cost of the sterilization of equipment? Assume a MARR of 15%.

Option A Option B

Initial cost $503,000 $456,000

Installation cost 30,000 25,000

Annual maintenance cost 25,000 18,000

Annual operating cost 100,000 120,000

Salvage value 28,000 20,000

Estimated life 15 years 10 years

Estimated annual savings 350,000 245,000