A manufacturer requires an additional 1000 square feet ofwarehouse space. A rein

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A manufacturer requires an additional 1000 square feet ofwarehouse space. A reinforced-concrete building added to theexisting main structure will cost $850000 whereas the sameamount of space can be costructed with a galvanized building for$595000. The life of the concrete building is estimated at 25years with a yearly maintenance cost of $23800. The life of thegalvanized building is estimated at 15 years and the annualizedmaintenance cost is estimated to be $53000. Average annualproperty taxes are 1.2 percent of first costs for the concretebuilding and 0.5 percent for the metal building. Assume that thesalvage value of the concrete building will be zero after 25 years.Compare the present worths of the two warehouse additions using 12percent interest rate for a 25-year study period in determiningthe minimum salvage value of the galvanized building after 25 yearsperiod to make it economically comparable to the concrete buildingassuming that its salvage value after 15 years is zero

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