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5. The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 10% per year. You have been asked to compare the two plans using the Capitalized Cost Method. The first plan (Skyline) calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. Skyline also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan (Prairie View) has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. Prairie View will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure, which plan would you recommend?

5. The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 10% per year. You have been asked to compare the two plans using the Capitalized Cost Method. The first plan (Skyline) calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. Skyline also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan (Prairie View) has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. Prairie View will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure, which plan would you recommend?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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5. The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 10% per year. You have been asked to compare the two plans using the Capitalized Cost Method. The first plan (Skyline) calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. Skyline also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan (Prairie View) has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. Prairie View will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure, which plan would you recommend?
Transcribed Image Text:5. The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 10% per year. You have been asked to compare the two plans using the Capitalized Cost Method. The first plan (Skyline) calls for an initial investment of $500,000, with expenses of $20,000 per year for the first 20 years and $30,000 per year thereafter. Skyline also requires an expenditure of $200,000 20 years after the initial investment, and this will repeat every 20 years thereafter. The second plan (Prairie View) has an initial investment of $700,000 followed by a single (one time) investment of $300,000 30 years later. Prairie View will incur annual expenses of $10,000 forever. Based on the Capitalized Cost measure, which plan would you recommend?
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