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

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

answer with cash flow diagram

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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Introduction

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Skyline

Prairie View

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SKYLIne Cash fLOW dIAGRAM

VIEW

Cash Flow Diagram of Prairie

VIEW

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