Question 1 of 5
A construction project manager is reviewing two design options for a new corporate facility. Option A costs $2.1M to build and has $180K/year in energy costs. Option B costs $2.8M to build but uses solar and passive cooling, resulting in $60K/year in energy costs. Over a 20-year lifecycle, which option is more financially and environmentally sound?
- A.Option A, because the upfront cost is lower and capital should be preserved
- B.Option B, because over 20 years it saves $2.4M in energy costs, yielding a net lifecycle saving of $1.7M over Option A despite the higher build cost.
- C.Option A, because the payback period for Option B's capital premium is more than 10 years, making the long-term savings too uncertain to justify the larger upfront commitment.
- D.Option B only if the organization has a formal sustainability mandate
Show answer and explanation
Correct answer: B
Lifecycle cost analysis: this option total = $2.1M + (20 × $180K) = $2.1M + $3.6M = $5.7M. this option total = $2.8M + (20 × $60K) = $2.8M + $1.2M = $4.0M. this option saves $1.7M over 20 years. The payback on the $700K premium: $120K/year savings; payback = 700/120 = 5.8 years — not 10 years as stated in option C. this option's lower upfront cost ignores operating costs. this option incorrectly makes the decision contingent on a formal mandate when the numbers clearly favor this option.