, determine whether the project should be undertaken.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Irrigation canals are proposed to be built in an arid region. The initial cost is
estimated to be P2,500,000 with annual maintenance and operation cost of P48,000.
For maximum efficiency, the canal will be dredged every 5 years at a cost of P50,000.
Annual income from farmers and cooperatives who benefit from the project is
expected to be P320,000. Assuming an annual interest rate of 9% and a 30-year
planning horizon, determine whether the project should be undertaken.
Transcribed Image Text:Irrigation canals are proposed to be built in an arid region. The initial cost is estimated to be P2,500,000 with annual maintenance and operation cost of P48,000. For maximum efficiency, the canal will be dredged every 5 years at a cost of P50,000. Annual income from farmers and cooperatives who benefit from the project is expected to be P320,000. Assuming an annual interest rate of 9% and a 30-year planning horizon, determine whether the project should be undertaken.
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