bart and morticia owners of the prestigious gomez addams office towers are concerned 602048

Bart and Morticia, owners of the prestigious Gomez-Addams Office Towers, are concerned about high heating and cooling costs and client complaints of temperature variation within the building. They commissioned an engineering study by Frasco-Prew Associates to identify the cause of the problems and suggest corrective action. Frasco-Prew”s basic recommendation is that a new HVAC (heating, ventilation, and air conditioning) system, featuring electronic climate control, be installed in the Towers. Over the next four years, the engineers estimate a new system will reduce heating and cooling costs by $125,000 a year. Cost of the new system will be $500,000 and can be depreciated over four years. Using a 25 percent tax rate and a 14 percent required return, should Bart and Morticia change the HVAC system? Use a four-year time horizon.