Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 2

The city council in a certain southwestern city is considering whether to construct permanent rest- rooms in 22 of its smaller parks (i.e., parks of less than 12 acres) or pay for portable toilets on a year- round basis. The cost of constructing the 22 permanent restrooms will be $3.8 million. The 22 portable restrooms can be rented for $7500 each for 1 year. The service life of a permanent rest- room is 20 years. Using an interest rate of 6% per year and an annual worth analysis, determine if the city should build the permanent restrooms or lease the portable ones.