An oil company plans to purchase a piece of vacant land on the corner of two busy streets for$50,000. On properties of this type, the company installs businesses of three different types.Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the$50,000 land cost.Cost*$ 83,000Type of BusinessConventional gas stationAdd automatic carwashAdd quick carwash195,000115,000*Improvements cost does not include $50,000 for the land.PlanABсNet Annual Income$26,50039,75031,200(a) Construct a choice table for interest rates from 0% to 100%.(b) If the oil company expects a 10% rate of return on its investments, which plan (if any) shouldbe selected?

An oil company is considering three different plans for developing a piece of vacant land. The…

An oil company plans to purchase a piece of vacant land on the corner of two busy streets for $50,000. On properties of this type, the company installs businesses of three different types. Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the $50,000 land cost. Cost* Type of Business $ 83,000 195,000 Conventional gas station Add automatic carwash Add quick carwash 115,000 *Improvements cost does not include $50,000 for the land. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the oil company expects a 10% rate of return on its investments, which plan (if any) should be selected? Plan A B C Net Annual Income $26,500 39,750 31,200

An oil company plans to purchase a piece of vacant land on the corner of two busy streets for $50,000. On properties of this type, the company installs businesses of three different types. Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the $50,000 land cost. Cost* Type of Business $ 83,000 195,000 Conventional gas station Add automatic carwash Add quick carwash 115,000 *Improvements cost does not include $50,000 for the land. (a) Construct a choice table for interest rates from 0% to 100%. (b) If the oil company expects a 10% rate of return on its investments, which plan (if any) should be selected? Plan A B C Net Annual Income $26,500 39,750 31,200

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

An oil company plans to purchase a piece of vacant land on the corner of two busy streets for
$50,000. On properties of this type, the company installs businesses of three different types.
Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the
$50,000 land cost.
Cost*
$ 83,000
Type of Business
Conventional gas station
Add automatic carwash
Add quick carwash
195,000
115,000
*Improvements cost does not include $50,000 for the land.
Plan
A
B
с
Net Annual Income
$26,500
39,750
31,200
(a) Construct a choice table for interest rates from 0% to 100%.
(b) If the oil company expects a 10% rate of return on its investments, which plan (if any) should
be selected?

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None
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