2. A sports complex is to be constructed. Two plans are under consideration. Plan I is to construct a three-storey building with provision for adding 12 stories at a future date. The cost of this initial building is P3, 000,000. In 10 years the 12 stories can be added at a cost of P10,2000,000. The life of the structure is 35 years with zero salvage value. Plan II is to construct for P1,100,000, a three-storey building which will be demolished after 10 years and replaced by a 15-storey structure at a cost of P18,300,000. The life of the structure is 35 years. the maintenance of Plan I will be P40,000 and Plan II, P35,000 per year for the first 10 years. After that, they will be alike. The property taxes will be 4%. Money is worth 25%. Which plan would you recommend? Use the following methods in making your comparison. (a) Rate of Return on Additional Investment Method (b) Equivalent Uniform Annual Cost (EUAC) Method (c) Capitalized Method
2. A sports complex is to be constructed. Two plans are under consideration. Plan I is to
construct a three-storey building with provision for adding 12 stories at a future date. The cost of this initial building is P3, 000,000. In 10 years the 12 stories can be added at a cost of P10,2000,000. The life of the structure is 35 years with zero salvage value. Plan II is to construct for P1,100,000, a three-storey building which will be demolished after 10 years and replaced by a 15-storey structure at a cost of P18,300,000. The life of the structure is 35 years. the maintenance of Plan I will be P40,000 and Plan II, P35,000 per year for the first 10 years. After that, they will be alike. The property taxes will be 4%. Money is worth 25%. Which plan would you recommend? Use the following methods in making your comparison.
(a) Rate of
(b) Equivalent Uniform Annual Cost (EUAC) Method
(c) Capitalized Method
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