A commercial building design cost $89/square-foot to construct eight years ago (for an 80,000-square-foot building). This construction cost has increased 5.4% per year since then. Presently, your company is considering construction of a 125,000-square-foot building of the same design. The cost capacity factor is X = 0.92. In addition, it is estimated that working capital will be 5% of construction costs, and that project management, engineering services, and overhead will be 4.2%, 8%, and 31%, respectively, of construction costs. Also, it is estimated that annual expenses in the first year of operation will be 55/square-foot, and these are estimated to increase 5.66% per year thereafter. The future general inflation rate is estimated to be 7.69% per year, and the market-based MARR = 12% per year (im). (Chapter 3 and 8.2)
- a. What is the estimated capital investment for the 125,000-square-foot building?
- b. Based on a before-tax analysis, what is the PW for the first 10 years of ownership of the building?
- c. What is the AW for the first 10 years of ownership in real dollars (R$)?
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Engineering Economy (17th Edition)
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