Engineering Economics Two options are available for contracting to paint your ho

Question

Engineering Economics

Two options are available for contracting to paint your house: A) The painter will use oil-base paint and do the job for $5000, guaranteed to last 10 years, B) the painter will use water-base paint and do the job for $3000. Assuming the cost of money is 10% and you will keep the house for at least 10 years find

1) the present value for each option. Based on this, which one would you choose

2) the annual equivalent worth (or EUAC, equivalent uniform annual cost). Based on this, which one would you choose.

Explanation / Answer

Based on present Value , I will choose option-B and based on Annual Equivalent Worth , I will choose Option-A

Particular Year A PV@10% B PV@10% 0 5000 5000 3000 3000 1 500 454.55 3000 2727.27 2 500 413.22 3 500 375.66 4 500 341.51 5 500 310.46 6 500 282.24 7 500 256.58 8 500 233.25 9 500 212.05 10 500 192.77 Present Value -1927.72 -272.73 Annual Equivalent Worth 500 300

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