An energy specialist was asked to provide two plans for the engineering department of Makati Shangri-La. The first plan proposes an initial investment of P250,000 now with a salvage value of 20% of the first cost 20 years hence. Meanwhile, total operations and maintenance costs are estimated to be 6% of the initial cost per year. Taxes will be 2% of the first cost. The second plan proposes an initial investment of P190,000 now and P160,000 in eight years. The operations and maintenance costs are estimated to be P9,000 per year for the initial installation and P8,000 a year for the second instalment. At the end of 20 years, salvage value will be equal to 20% of the investments. Taxes will be 2% of the first cost. If money is worth 12%, which plan would you recommend?
An energy specialist was asked to provide two plans for the engineering department of Makati Shangri-La. The first plan proposes an initial investment of P250,000 now with a salvage value of 20% of the first cost 20 years hence. Meanwhile, total operations and maintenance costs are estimated to be 6% of the initial cost per year. Taxes will be 2% of the first cost. The second plan proposes an initial investment of P190,000 now and P160,000 in eight years. The operations and maintenance costs are estimated to be P9,000 per year for the initial installation and P8,000 a year for the second instalment. At the end of 20 years, salvage value will be equal to 20% of the investments. Taxes will be 2% of the first cost. If money is worth 12%, which plan would you recommend?
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