3. The National Irrigation Administration is studying which of the two big ticket project to undertake. Only one can be chosen. The estimated cash flow is described below: Proposed Construction of: 1) Major Dam in Siera Madre: Initial Cost: P 26 million; Benefits: P8.25 million per year; Disbenefits: P 2.35 million per year; Salvage value: 2.5 million; Life: 35 years 2) Major Dam along the Agno River : Initial Cost: 35 million; Benefits: 7.15 million per year; Disbenefits: 2.0 million per year; Salvage Value: P1.75 million; Life 35 years.
3. The National Irrigation Administration is studying which of the two big ticket project to undertake. Only one can be chosen. The estimated cash flow is described below: Proposed Construction of: 1) Major Dam in Siera Madre: Initial Cost: P 26 million; Benefits: P8.25 million per year; Disbenefits: P 2.35 million per year; Salvage value: 2.5 million; Life: 35 years 2) Major Dam along the Agno River : Initial Cost: 35 million; Benefits: 7.15 million per year; Disbenefits: 2.0 million per year; Salvage Value: P1.75 million; Life 35 years.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![3. The National Irrigation Administration is studying which of the two big ticket project to undertake. Only one can be chosen.
The estimated cash flow is described below:
Proposed Construction of:
1) Major Dam in Siera Madre:
Initial Cost: P 26 million; Benefits: P8.25 million per year; Disbenefits: P 2.35 million per year; Salvage value: 2.5 million; Life:
35 years
2) Major Dam along the Agno River :
Initial Cost: 35 million; Benefits: 7.15 million per year; Disbenefits: 2.0 million per year; Salvage Value: P1.75 million; Life 35
years.
Assume a discount rate of 6% per year, make a recommendation which proposal the National Irrigation Administration should
implement based on economic analysis alone.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff96d91d2-721b-4d34-95a6-f3e5fbff6c06%2F71241778-4c4a-45b9-8b82-1c7db73a5a5d%2Ftue7h66_processed.png&w=3840&q=75)
Transcribed Image Text:3. The National Irrigation Administration is studying which of the two big ticket project to undertake. Only one can be chosen.
The estimated cash flow is described below:
Proposed Construction of:
1) Major Dam in Siera Madre:
Initial Cost: P 26 million; Benefits: P8.25 million per year; Disbenefits: P 2.35 million per year; Salvage value: 2.5 million; Life:
35 years
2) Major Dam along the Agno River :
Initial Cost: 35 million; Benefits: 7.15 million per year; Disbenefits: 2.0 million per year; Salvage Value: P1.75 million; Life 35
years.
Assume a discount rate of 6% per year, make a recommendation which proposal the National Irrigation Administration should
implement based on economic analysis alone.
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