Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)
Two methods of carrying away surface runoff water from a new subdivision are being evaluated:(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 ofredigging and shaping would be required at five-year intervals forever.(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Two methods of carrying away surface runoff water from a new subdivision are being evaluated:
(a) Method A: Dig a ditch. The initial cost would be $30,000, and $10,000 of
redigging and shaping would be required at five-year intervals forever.
(b)Method B: Lay concrete pipe. The initial cost would be $75,000, and replacement pipe would be required at 50-year intervals at a net cost of $90,000 indefinitely.
At i = 12%, which method is the better one? (Hint: Use the capitalized-equivalent-worth approach.)
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